Boring can also make you money

American Standard. Have you seen this brand? Probably everywhere you go in the US and likely in many other countries. If you are not sure, check out your air conditioner to see if it happens to be this brand. Chance is high it is. I’m talking about Ingersoll Rand (IR), the company selling, installing, and maintaining heating, ventilation, and air conditioning ("HVAC") equipment with well-known brand names like Ingersoll-Rand, American Standard, Trane etc. While the business is full of boringness, this kind of equipment is a key part of any home and all types of commercial properties. And Ingersoll Rand is the go-to company for HVAC equipment! I’d think IR is a recession proof business as we will still need HVAC regardless of the economic situation. While its stock price could tank as well if a recession hits us, it is much less likely to be permanently damaged due to the nature of its business. As such, IR can been a good candidate for long term holding, especially for dividend reinvestment. It pays a respectful 2.5% dividend with a very low payout ratio of only 40%, meaning it has a lot cash in hands to further increase its dividend. This is what it has done actually with an amazing record: it started to pay dividends in 1977 and has never missed it. Although its track record of increasing dividends is not perfect as it has cut down the payout a few times during bad business cycles, nevertheless, it has always made up by paying much more following the recovery. In fact, in the past 8 years, it has increased its dividend 25% annually, an extremely impressive record. Given the business is booming up along with the fast growing economy in the US, I think the chance is high that it will continue to pay much higher dividends in the years ahead.
Having said that, what really interests me now is its technical strength at the moment. IR has been in sideway moves for a year now after a amazing 5 times up move since recovering from the 2009 recession. Following a great earnings report on Jul 25, it jumped up and clearly broke out to the upside. While the momentum is strong, the breakout may be start of a long let up with a potential 30-40 points move. Why so? Well, IR has been building up a very long bull flag with a pole starting roughly at about $50. After a breakout, the stock tends to move in the similar scale to the flag pole, i.e. a 30-40 points for IR. Right now it is trading hands around $97 with a chance of cooling down a bit following a fast up move. I think it will be a great buy if it comes down to the area of $90-95. The prospect for IR is great for the next few years!