Nordson (NDSN) has the 14th longest dividend growth streak among U.S. public companies with 53 consecutive years of increases, but many investors have never heard of this member of the dividend kings list here.

However, Nordson is certainly a business that’s worth getting to know.

The company has sticky customer relationships, a large base of recurring revenue, extremely diversified end markets, low payout ratios, and excellent dividend growth prospects.

While Nordon’s dividend yield is far too low to consider the company for our list of the best high dividend stocks here, it is the type of business that can deliver exceptionally long-term total returns for shareholders.

Let’s take a closer look at this dividend champion.

Business Overview

Nordson was founded in 1954 and manufactures products used for dispensing adhesives, coatings, sealants, biomaterials, and other materials; for fluid management; for test and inspection; and for UV curing and plasma surface treatment.

Approximately 40% of Nordson’s revenue is recurring in the form of parts and consumables (e.g. tips, connectors, cartridges, valves, tubing), with another 39% of sales from standard products and the remaining 21% of revenue from engineered systems.

By geography, Nordson derived 29% of its fiscal year 2016 revenue from the U.S., 28% from Europe, 29% from Asia Pacific, 7% from the Americas, and 7% from Japan. Emerging markets have driven organic growth, with revenues growing at a 12.6% annual growth rate over the last decade.

By end market, roughly 38% of Nordson’s sales are from consumer non-durables, 17% from consumer durables, 9% circuit board assembly, 9% electronic components, 8% medical, 6% industrial, 7% automotive, and 6% semiconductor.

The company serves virtually every end market including packaging, nonwovens, electronics, medical, appliances, energy, transportation, construction, and general product assembly.

Segments

Adhesives Dispensing Systems (49% of sales, 26.1% operating margin): products to melt, filter, pump, transport, dispense, and deposit adhesives, polymers and other materials in the manufacturing of a wide range of goods (e.g. food and beverage packaging, diapers, labeling, medical devices, cars, furniture, etc.).

Advanced Technology Systems (37% of sales, 23.6% operating margin): precision dispensing, fluid management, test, inspection, and surface treatment products for electronics, medical, and general industrial markets (e.g. smartphones, tablets, solar panels, LEDs, medical devices, semiconductor packaging, printed circuit boards).

Industrial Coating Systems (14% of sales, 17.2% operating margin): precision equipment and systems to apply and cure paints, sealants, coatings, cold materials, and other materials to a wide range of products (e.g. appliances, lawn equipment, automobile sealing, pipe coating, electronics, etc.).

Business Analysis

Nordson’s solutions help customers increase uptime, boost productivity (i.e. better product yields and faster line speeds), improve efficiency (i.e. reduce consumption of materials), and ultimately achieve a lower total cost of ownership.

The cost of Nordson’s solutions make up a small proportion of a manufacturer’s total factory and product cost but deliver a high return on investment through the efficiencies and reliability they provide.

For example, Nordson’s technology might help a manufacturer produce 10% more volume out of its existing capacity by enhancing production speed. Essentially, manufacturers are happy to pay a reputable company like Nordson to make sure their production lines are operating smoothly and cost effectively.

With roots tracing back over 100 years, Nordson has built up a sizable installed base with thousands of customers. Nordson’s solutions are literally installed and serviced at a customer’s manufacturing facility, which creates switching costs.

To replace Nordson with another vendor would require halting production and retooling each production line. Few vendors also have the global sales and service capabilities that Nordson had built up over the last 50+ years when it started expanding internationally (the company is in over 35 countries today).