Deep Analysis of Acme United Corporation's 16-Cent Quarterly Dividend

Acme United’s announced 16-cent quarterly dividend (annualized $0.64) has multiple implications for investors:

• Based on the current stock price of $41.70, the dividend yield is
  1.53%
  [0]
• This yield is at a reasonable level in the consumer staples industry, reflecting the company’s robust cash flow management
• Compared to the S&P 500 average yield of approximately 1.3-1.5%, Acme United offers competitive shareholder returns

• Increasing from 15 cents to 16 cents represents a
  6.7% dividend growth
  [0]
• Maintaining a 5-year consecutive dividend growth record shows management’s confidence in the financial outlook[1]
• This gradual growth strategy balances shareholder returns with business reinvestment needs

Acme United has demonstrated strong cash flow generation capacity:

• Approximately $12 million in free cash flow over the past 12 months
  [1]
• Total dividend payments of approximately $2 million
  [1]
• The free cash flow coverage ratio reaches 6x, providing sufficient support for dividend payments

The company’s profitability metrics support the sustainability of its dividend policy:

• Earnings Per Share (EPS) of $2.45
  (TTM)[0]
• Dividend payout ratio of only 25.41%
  [1], well below the 50% safety threshold
• Return on Equity (ROE) of 9.87%
  [0], indicating effective use of shareholder capital
• Net profit margin of 5.56%
  and
  operating margin of 7.61%
  [0], showing solid performance in the industry

• Current ratio of 4.47
  and
  quick ratio of 1.75
  [0], indicating sufficient liquidity
• Bank debt minus cash is $23 million
  (as of June 30, 2025)[1], a significant improvement from $33 million in the same period of 2024
• Low debt risk classification[0], providing a solid foundation for the dividend policy

Acme United’s dividend policy reflects the following characteristics:

• A low payout ratio of around 25% leaves ample room for future dividend growth
• Quarterly regular payment model provides predictable cash flow for investors
• 5-year compound annual growth rate (CAGR) of dividends reaches 5.25%[1], basically matching the company’s profit growth

• Q2 2025 net profit of $4.8 million, up 7% year-over-year[1]
• Despite a slight decline in revenue (3%), profit growth was achieved through cost control
• Sales in the Canadian market increased by 28%[1], showing the effectiveness of business diversification

According to discounted cash flow (DCF) analysis:

• Conservative valuation of $46.55
  (+11.6% premium)[0]
• Base case valuation of $63.84
  (+53.1% premium)[0]
• The current stock price of $41.70 is undervalued relative to its intrinsic value
• This provides dual support for dividend growth and potential stock price appreciation

Acme United’s dividend policy is particularly suitable for:

• Income-oriented investors
  : Seeking stable but moderate dividend income
• Risk-averse investors
  : Defensive characteristics of the consumer staples industry
• Long-term investors
  : Benefiting from compound growth and potential value revaluation

Investors should pay attention to the following potential risks:

• Slow revenue growth
  : Q2 2025 revenue decreased by 3%[1]
• Tariff impact
  : The company is responding by shifting production locations, but cost pressure remains
• Weak European market
  : Q2 European sales decreased by 6%[1]

Acme United’s 16-cent quarterly dividend reflects:

1. Financial robustness
   : Strong cash flow and low debt support sustainable dividends
2. Management prudence
   : Conservative payout ratio ensures financial flexibility
3. Growth potential
   : Diversified market layout and cost optimization measures
4. Valuation appeal
   : Undervaluation relative to intrinsic value

Based on a dividend yield of 1.53%, a dividend growth rate of 6.7%, a healthy payout ratio of 25%, and a strong financial foundation, Acme United’s dividend policy has high sustainability and investment appeal in the current market environment, making it suitable for inclusion in a long-term investment portfolio focused on income.

[0] Gilin API Data
[1] Yahoo Finance - “Acme United Corp (ACU) Q2 2025 Earnings Call Highlights” (https://finance.yahoo.com/news/acme-united-corp-acu-q2-071225360.html)
[2] Seeking Alpha - “Acme United Corporation (ACU) Stock Price, Quote, News & Analysis” (https://seekingalpha.com/symbol/ACU)
[3] Acme United Investor Relations - “News Releases” (https://acmeunited.gcs-web.com/news-releases)