The London Stock Exchange has a wide range of dividend stocks for investors to pick from. And among the roughly 1,700 companies listed in the UK, Somero Enterprises (LSE:SOM) is among one of my favourite and largest dividend-paying investments.
Why Somero?
As a quick crash course, Somero Enterprises is a leading designer and manufacturer of laser-guided concrete laying screed machines. It’s not likely a tool individuals will come across very often.
However, for those working within the construction industry, Somero’s machines play a critical role in ensuring the flooring in non-residential buildings is as flat as possible. That’s crucial for warehouses, retail stores, hospitals, car parks and, most excitingly today, data centres.
As the US ramps up its investments into infrastructure, projects for new data centres and chip foundries are steadily being greenlit. That’s a particularly exciting prospect for Somero, given the US is the firm’s primary target market. And it’s a tailwind that’s already started to bear fruit, with management highlighting a backlog of US projects with activity finally ramping back up after enduring labour shortages and concrete rationing.
What’s up with the dividend?
Somero doesn’t look like a typical choice for dividend investment. Apart from paying dividends in a foreign currency, a quick glance at the group’s dividend history shows a constant fluctuation of hikes and cuts. The share price also seems to have followed a similar pattern of swinging up and down as well.
| Year | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| Dividend Per Share | $0.3095 | $0.247 | $0.3991 | $0.5172 | $0.3548 | $0.2859 |
This fluctuating pattern perfectly demonstrates the cyclical nature of Somero’s business. Since operations are entirely driven by activity within the construction industry, bad weather, higher interest rates and macroeconomic headwinds can be disruptive.
However, this isn’t anything new. And management’s prudent capital allocation and financial planning skills have kept the balance sheet debt-free despite the constant swings in cash flows.
Leadership’s changing hands
Smart capital allocation is a rare skill to come by. So it’s a sad revelation that CEO Jack Cooney is stepping down at the end of 20 March. After 27 years of growing the company to a £153m enterprise, Cooney is off to enjoy a well-deserved retirement. And chairman Larry Horsch, who joined Somero in 2009, will also be departing at the same time.
It seems the firm is losing a lot of talent due to age. But succession planning has actually been in the works for a while. The first steps were taken last June with the promotion of Jesse Aho to chief operating officer of Global Operations and then president of the entire company six months later.
It’s still unclear who will move into the corner office. Somero’s currently exploring external options with a third-party executive search firm. However, whether any of these candidates will be capable of filling Cooney’s shoes remains to be seen.
It’s a risk investor’s need to consider carefully when exploring Somero as a potential investment today. Yet, personally, I remain optimistic about the firm’s long-term trajectory. Given my already sizable stake in the business, it’s not a stock I’m rushing to buy right now.
However, for investors seeking exposure to the construction industry ahead of artificial intelligence (AI) infrastructure investments, Somero could be worth a closer look.
