Ecolab (ECL) is arguably one of the most reliable businesses that money can buy, which is perhaps why the company is a large holding in Bill Gates’ dividend portfolio here.

Although Ecolab’s dividend yield is low (1.1%), the company’s long-term growth outlook is excellent and supported by its impressive moat (90% recurring revenue in the form of essential consumables; entrenched customer relationships; twice as large as its next biggest competitor; more than 25,000 customer-facing employees).

Dividend growth investors will also appreciate the fact that Ecolab is a member of the dividend aristocrats list here, highlighting the durability of its business and its shareholder-friendly culture.

Let’s take a closer look at this impressive dividend grower to see if it’s an investment opportunity worth considering today.

Business Overview

Ecolab sells a wide range of sanitizers, cleaners, lubricants, cleaning systems, dispensers, water treatment products, and on-site services that are used by customers in virtually every industry (e.g. restaurants, hotels, hospitals, laundromats, manufacturing plants, oil wells, etc.) to keep their food safe, maintain clean environments, and optimize water and energy use.

To give you an idea of Ecolab’s scope of business, during 2016 the company helped customers wash more than 31 billion hands, process 42% of the world’s total milk, clean 113 million loads of linen, ensure the safety of 27% of the world’s processed food, and manage 1.1 trillion gallons of water. Overall, Ecolab is in more than 1 million customer locations in over 170 countries around the world.

Acquisitions have played a meaningful role in the company’s evolution in recent years.

The company merged with Nalco in 2011 in an $8 billion deal to become the global leader in water, hygiene, and energy technologies and services. This deal increased the company’s exposure to industrial markets, which are big users of water treatment products, and helped Ecolab serve customers more comprehensively.

In 2013, Ecolab acquired Champion Technologies for $2 billion to significantly enhance its position in the upstream energy services market. The company also acquired Anios, a European healthcare and hygiene business, for $800 million in 2017.

By geography, ECL generated 58% of its 2016 revenue in North America, 23% in Europe, Middle East and Africa, 13% in Asia Pacific, and 6% in Latin America. The company has been expanding its footprint in emerging economies like China and India which have a higher growth potential compared to mature markets like the U.S.

Segments

Global Industrial (36% of 2016 sales): provides water treatment and process applications, and cleaning and sanitizing solutions primarily to large customers within the manufacturing, food and beverage processing, chemical, mining and primary metals, power generation, pulp and paper and commercial laundry industries.

Global Institutional (35% of sales): provides specialized cleaning and sanitizing products to the foodservice, hospitality, lodging, healthcare, government, education, and retail industries.

Global Energy (23% of sales): serves the process chemical and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications. The biggest piece of the business is oil fuel chemicals that treat reservoirs (e.g. kill bacteria, prevent corrosion, clean water).

Other (6% of sales): provides pest elimination and kitchen equipment repair and maintenance.

Business Analysis

Ecolab is a unique business. The company has a large portfolio of valuable and protected technologies (over 7,700 patents) that allow it to sell its solutions at 10-20% price premiums compared to competitors’ offerings.

While the initial cost is higher, the savings that these products deliver over time (e.g. less waste, more energy efficient, more reliable) make them cheaper.

However, Ecolab’s main competitive advantages are its dependable service quality and people. The company focuses on continuous customer-centric innovation and personalized service. At the end of the day, Ecolab is selling service and consistency (e.g. food needs to be kept safe, water needs to be kept clean, etc.).