24/7 Wall St. Insights

• Argan Inc. (NYSE: AGX) just rewarded its shareholders with a 25% dividend hike.
• It is the second year in a row with a sizable boost to its payout.
• Plus, shares are trading near an all-time high.
• Also: 2 Dividend Legends to Hold Forever.

Argan Inc. (NYSE: AGX) is rewarding its shareholders with a quarterly dividend of $0.375 a share, payable on Thursday, Oct. 31. That was a 25% increase over the prior payout, representing an annual payout of $1.50 per share and a yield of 1.2%. That underscores the management’s commitment to delivering consistent value to investors.

Why Investors Like Dividends

Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.

Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Its Dividend History

Argan has paid a quarterly dividend since the beginning of 2018, along with a few special dividends of $1.00 per share. The payout was bumped up by a nickel per share about a year ago, from $0.25 per share to $0.30. Before 2018, dividends were paid annually and ranged from $0.30 to $1.00 a share.

Note that the share price has grown by around 175% since 2018 as well, offering investors growth along with income.

The Company

Argan, through its subsidiaries, provides engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services to the power generation market.

The Power Services segment offers engineering, procurement, and construction, as well as designing, building, and commissioning of large-scale energy projects to the owners of alternative energy facilities, such as biomass plants, wind farms, and solar fields. It offers design, construction, project management, start-up, and operation services for projects with approximately 18 gigawatts of power-generating capacity. This segment serves independent power project owners, public utilities, power plant equipment suppliers, and other commercial firms.

The Industrial Services segment provides industrial construction and field services and vessel fabrication services for fertilizer, engineering and construction, forest products, and various other industrial companies in southeast region of the United States.

The Telecom Services segment offers trenchless directional boring and excavation for underground communication and power networks, as well as aerial cabling services. It also installs buried cable, high and low voltage electric lines, and private area outdoor lighting systems. It provides structured cabling, terminations, and connectivity that offers the physical transport for high-speed data, voice, video, and security networks. This segment serves electricity cooperative, state and local government agencies, counties and municipalities, and technology-oriented government contracting firms, as well as federal government facilities in the mid-Atlantic region of the United States.

Its headquarters are in Rockville, Maryland. The company was founded in 1961 by Rainer H. Bosselmann, former CEO and board chair. Argan competes with or is similar to Dycom Industries Inc. (NYSE: DY), KBR, Inc. (NYSE: KBR), and others in the engineering and construction industry.

Argan recently announced the retirement of its chief financial officer, who was replaced by the company’s corporate controller. In addition, the past two quarterly reports were better than expected. “We are seeing continued momentum across our business as we move through fiscal 2025,” said CEO David Watson.

The Stock

The share price has grown about 240% in the past five years, handily outperforming the Dow Jones industrial average in that time. In the past 90 days, the stock is up more than 75%, while the S&P 500 has gained 7% or so. Argan shares hit an all-time high of $138.00 this week.

Just one of three analysts who follow the stock recommend buying shares. Their consensus price target is much less than the current price target, meaning they see no upside potential at this time.

Institutional investors hold about 89% of the shares. BlackRock, River Road Asset Management, and Vanguard have notable stakes. Nearly 13 million shares, or about 2% of the float, are held short. Note that the founder just sold about $2.9 million worth of shares, and other directors parted with shares in September.

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