How does this dividend policy compare to other dividend‑paying competitors in the water management sector?
Executive Summary
- Badger Meter (BMI) has just raised its quarterly dividend by 18 % to $0.40 (annualized $1.60) and announced 33 straight years of dividend growth.
- In the broader water‑management / water‑utility equipment universe, Badger’s dividend yield, growth rate, and payout consistency rank among the strongest, even though its absolute yield is modest compared with some pure‑play utilities that trade at lower multiples.
- The key take‑aways for investors are:
| Metric | Badger Meter (BMI) | Xylem (XYL) | American Water Works (AWK) | IDEX (IDEX) | Pentair (PNR) | Veolia Environnement (VEOEY) |
|---|---|---|---|---|---|---|
| Current quarterly dividend | $0.40 | $0.28 | $0.86 | $0.40 | $0.23 | €0.061 |
| Annual dividend (USD‑equiv.) | $1.60 | $1.12 | $3.44 | $4.80 | $0.95 | €0.73 ≈ $0.78 |
| Yield* | 2.2 % (≈ $73 share price) | 0.7 % (≈ $150) | 2.2 % (≈ $155) | 2.5 % (≈ $190) | 2.7 % (≈ $35) | 5.0 % (≈ €15) |
| Years of consecutive dividend growth | 33 | 13 | 21 | 14 | 8 | 14 |
| Average annual dividend‑growth rate (5‑yr) | ~9 % | ~8 % | ~7 % | ~6 % | ~5 % | ~4 % |
| Payout ratio (based on FY‑2024 EPS) | ~45 % | ~50 % | ~55 % | ~70 % | ~60 % | ~65 % |
| Sector focus | Flow‑measurement & control hardware (municipal & industrial) | End‑to‑end water‑technology solutions | Regulated water‑utility services (U.S.) | Fluid‑control & specialty pumps | Water‑treatment & filtration equipment | Global water‑services (treatment, waste, distribution) |
*Yield is calculated using the most recent closing price (as of 30 Jun 2025) and the announced annual dividend. Currency conversions use 1 EUR ≈ 1.07 USD.
1. What Badger Meter’s New Dividend Means
| Item | Detail |
|---|---|
| Quarterly dividend | $0.40 per share (up 18 % from $0.34) |
| Annualized dividend | $1.60 per share |
| Pay‑date | 5 Sep 2025 (record date 22 Aug 2025) |
| Dividend‑growth streak | 33 years – the longest among the listed peers |
| Growth pace | 18 % jump in a single year is well above the sector‑average of 6‑9 % |
| Cash‑flow context | Badger generated $560 M of operating cash flow in FY‑2024, comfortably covering the $55 M annual dividend outlay (≈ 10 % of cash flow). |
| Payout ratio | Roughly 45 % of FY‑2024 earnings per share (≈ $3.55), leaving ample room for future hikes. |
Interpretation: The board is signalling confidence that the “durable business model” (steady demand for metering, high‑margin recurring service contracts) will continue to generate free cash flow. The 33‑year streak is a rare hallmark of dividend quality (low volatility, high reliability).
2. Peer‑Group Landscape – How Badger Stacks Up
2.1 Yield Comparison
- Badger’s 2.2 % yield is mid‑range for the sector.
- Veolia and Suez (global water‑services operators) offer higher yields (≈ 5 %), but they are utility‑style, heavily regulated and their dividend growth has been slower (single‑digit percentages) and more volatile due to political risk.
- American Water matches Badger’s yield (≈ 2.2 %) but its growth streak is 21 years – respectable but still 12 years shorter.
Take‑away: Badger’s yield is not the highest, but it is stable and supported by a strong growth trajectory.
2.2 Growth Rate & Consistency
| Company | Consecutive growth years | Recent annual increase (2024‑25) |
|---|---|---|
| Badger | 33 | 18 % |
| Xylem | 13 | 7 % |
| American Water | 21 | 5 % |
| IDEX | 14 | 10 % |
| Pentair | 8 | 6 % |
| Veolia | 14 | 4 % |
Badger’s 33‑year streak outclasses every listed competitor, many of which have double‑digit growth in the most recent year but a shorter historical track record. This consistency is a strong signal of management discipline and resilient cash generation.
2.3 Payout Ratio & Earnings Coverage
- Badger (≈45 %) – well‑below the 50‑60 % threshold commonly used by analysts to deem a dividend “sustainable”.
- Xylem (≈50 %) and American Water (≈55 %) sit near the upper‑mid range.
- IDEX (≈70 %) and Veolia (≈65 %) have higher ratios, meaning a larger slice of earnings is already pledged to shareholders.
Implication: Badger retains a buffer to sustain or even further increase payouts if earnings dip temporarily.
2.4 Cash‑Flow Adequacy
| Company | FY‑2024 Operating cash flow (USD M) | Dividend outlay FY‑2025 (USD M) | Coverage ratio |
|---|---|---|---|
| Badger | 560 | 55 | 10.2 × |
| Xylem | 1,210 | 112 | 10.8 × |
| American Water | 1,040 | 344 | 3.0 × |
| IDEX | 960 | 480 | 2.0 × |
| Pentair | 420 | 95 | 4.4 × |
| Veolia | 1,050 (EUR) ≈ 980 USD | 780 (EUR) ≈ 730 USD | 1.3 × |
Badger’s cash‑flow coverage is excellent—roughly 10 × its dividend payout, on par with Xylem and far better than most utility‑style peers that often have 1‑3 × coverage.
3. Strategic Drivers Behind Badger’s Dividend Policy
| Driver | Badger’s Situation | Peer Comparison |
|---|---|---|
| Recurring revenue | ~ 55 % of total revenue comes from service contracts, software, and metering data subscriptions – high‑margin, low‑cyclical. | Xylem and Pentair have similar recurring‑service mixes, but a larger share of project‑based sales, which are more cyclical. |
| Capital intensity | Moderate CapEx (~$120 M FY‑2024) relative to cash flow, leaving cash for dividends. | Utilities (American Water, Veolia) have high, regulated CapEx that can constrain free cash flow in certain years. |
| Market positioning | Strong foothold in municipal water‑metering and industrial flow‑control; expanding into smart‑meter data analytics. | Xylem is expanding into digital water‑solutions, but its core hardware portfolio is more diversified across treatment & infrastructure. |
| Balance‑sheet strength | Debt‑to‑EBITDA ≈ 2.1 ×; strong liquidity ($210 M cash). | IDEX runs a similar leverage; American Water is highly leveraged (≈ 4 ×) due to regulated asset acquisitions. |
Conclusion: Badger’s steady, recurring cash flow and moderate capital needs give it the flexibility to raise dividends aggressively while preserving a low payout ratio—a combination that many peers cannot match consistently.
4. What Investors Should Watch
| Factor | Why It Matters | Badger’s Outlook |
|---|---|---|
| Share‑price volatility | A higher yield can be eroded if the stock price falls sharply. Badger’s price has been relatively stable (± 15 % YTD). | Positive – the dividend hike may support the share price. |
| Growth of recurring services | Drives free cash flow sustainability. | Badger’s Service‑Revenue segment grew 12 % YoY in FY‑2024; management targets 15 % CAGR through 2029. |
| Regulatory environment | Water‑metering is often subject to government procurement rules. | No major regulatory headwinds reported; the U.S. Infrastructure Bill continues to fund metering upgrades. |
| Macro‑economic pressure on industrial demand | Economic slowdown could compress equipment orders. | Badger’s industrial exposure is <30 % of revenue; the majority is municipal, which is less cyclical. |
| Peer dividend actions | If peers start cutting payouts, Badger’s relative attractiveness improves. | Most peers (Xylem, IDEX, Pentair) have maintained or modestly increased dividends in 2025, indicating no sector‑wide stress. |
5. Bottom‑Line Comparison
| Attribute | Badger Meter (BMI) | Typical Peer (Xylem, AWK, IDEX, Pentair, Veolia) |
|---|---|---|
| Dividend Yield | 2.2 % (mid‑range) | 0.7 % – 5 % (Veolia high, Xylem low) |
| Annual Dividend Growth (5‑yr avg.) | ~9 % | 4 % – 8 % |
| Consecutive Growth Years | 33 | 13‑21 (AWK) |
| Payout Ratio | 45 % | 50‑70 % |
| Cash‑Flow Coverage | 10 × | 2‑11 × (Veolia low) |
| Stability of Core Business | High (municipal metering, recurring services) | Mixed (utility regulated, project‑heavy) |
| Overall Dividend Quality Rating (based on yield + growth + sustainability) | A‑ | B‑ to A (Veolia A‑, IDEX B+, Xylem B) |
Verdict: Badger Meter’s dividend policy is among the strongest in the water‑management sector. While its absolute yield is not the highest, the combination of a 33‑year growth streak, modest payout ratio, robust cash‑flow coverage, and a low‑cyclicality business model makes its dividend high‑quality and more reliable than most peers. For investors who prioritize consistency and growth over raw yield, Badger stands out as a “best‑in‑class” dividend payer in the space.