Now, in order for a company to pass the Mad Money “safe-test,” the earnings should be twice the size of the dividend. So with Rollins expected to earn 89 cents this year and 99 cents in 2011, ROL has plenty of room to keep increasing its dividend before it gets anywhere near non-safe territory.
Currently, the company has 2 million customers and about 500 locations all around the globe, with 40 percent of its business coming from commercial pest control, 40 percent from residential and 20 percent from termite control. Best of all, Cramer said, this is not a business that needs a good economy to make money and one that should not suffer if we get a double-dip recession.
Rollins has close to 20 percent of the market share in domestic commercial pest control and has expanded internationally by establishing 14 overseas franchises – including those in Panama, Mexico, the UAE, South Korea, Jamaica, Lebanon and Ireland – in order to keep its costs down.
Cramer told viewers that ROS is also a cash generator that averages $76 million in free cash flow a year, with $82 million in just the first three quarters of 2009. And the company is now focused on improving customer retention and increasing its sales yield through better closure rates.
Plus, Cramer said, the company made a smart acquisition by buying Home Team Pest Defense in 2008, the third-largest residential pest control play at the time. Home Team has a product that can be pre-installed inside the walls of a house through their exclusive partnership with the homebuilder Toll Brothers . The company is also working on expanding its relationship with Pulte Homes.
Right now Rollins is just a point off its high, but Cramer thinks this stock is worth it given the size of its dividend increase. And it could go even higher if the company picks up more coverage.
The bottom line: An increased payout means that a buiness is in good shape.
"That's why we like dividend raisers and the sompanies that put them through," Cramer said.
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