Updated 3/5/25
Allegion plc (NYSE: ALLE) is a global security solutions provider, specializing in both mechanical and electronic security products. With brands like Schlage, Von Duprin, and CISA under its umbrella, the company serves residential, commercial, and institutional markets worldwide. Based in Dublin, Ireland, Allegion operates in over 130 countries, offering door locks, access control systems, and security management solutions.
As a leader in the security industry, Allegion has built a reputation for strong financial performance and stable growth. For dividend-focused investors, Allegion provides an attractive mix of reliability and long-term value. This analysis takes a closer look at its dividend history, growth potential, financial health, valuation, and potential risks.
Key Dividend Metrics
- Forward Annual Dividend: $2.04 per share
- Forward Annual Dividend Yield: 1.65%
- Trailing Annual Dividend: $1.92 per share
- Trailing Annual Dividend Yield: 1.55%
- 5-Year Average Dividend Yield: 1.33%
- Payout Ratio: 28.15%
- Next Dividend Payment Date: March 31, 2025
- Ex-Dividend Date: March 14, 2025
Allegion’s dividend yield may not be the highest in the market, but its steady growth and low payout ratio suggest that the company is committed to maintaining and increasing shareholder returns over time.
Dividend Overview
Allegion has a strong track record of paying and growing its dividends. While its yield is not particularly high compared to other income-focused stocks, the company has shown a pattern of consistent increases. For investors who prioritize dividend stability over high yield, Allegion is a solid option.
One of the main reasons Allegion can sustain and grow its dividend is its conservative payout ratio. With only 28.15% of earnings paid out as dividends, the company retains plenty of cash to reinvest in its business. This balance allows it to continue rewarding shareholders while still funding growth initiatives.
The upcoming ex-dividend date of March 14, 2025, is important for investors who want to receive the next payout. Those looking to collect dividends should ensure they own shares before this date.
Dividend Growth and Safety
Dividend Growth
Allegion has been increasing its annual dividend consistently, with its most recent bump bringing it from $1.92 to $2.04 per share. This represents a growth rate of about 6.25%, a solid increase that signals confidence in the company’s future earnings.
Looking at a broader trend, the company has maintained a dividend growth rate of 8-10% per year over the past five years. While not the highest in the market, it’s a steady and sustainable pace, which is crucial for long-term investors.
Dividend Safety
A safe dividend is just as important as a growing one. Allegion checks all the right boxes when it comes to maintaining a secure payout.
- The payout ratio is well below 50%, meaning the company has significant earnings leftover after dividends.
- The operating cash flow of $675 million provides a healthy cash reserve to cover dividend payments.
- The company’s earnings per share (EPS) of $6.82 shows strong profit growth, which supports future dividend increases.
With these factors in place, Allegion’s dividend appears safe, with room for further growth in the coming years.
Chart Analysis
The stock price of Allegion (ALLE) has been experiencing a shift in momentum, with the 50-day moving average (orange line) crossing below the 200-day moving average (blue line). This indicates a potential bearish trend, as shorter-term price action is now weaker than its longer-term trend.
The stock had a strong uptrend in the middle of last year, reaching a peak above $150 before entering a downtrend. Since then, it has been struggling to regain upward momentum, with multiple failed attempts to break above key resistance levels. The price is currently hovering near $126.33, below both moving averages, which suggests continued downward pressure.
Volume analysis shows increased selling activity during recent declines, with spikes in volume coinciding with pullbacks. However, there are also moments where buying pressure appears, leading to temporary rebounds. This indicates that while there is selling pressure, some investors are stepping in at lower levels.
The RSI (Relative Strength Index) is currently around 59.9, which is in neutral territory. It suggests that the stock is not in overbought or oversold conditions, leaving room for movement in either direction depending on market sentiment and upcoming catalysts.
In the past five trading sessions, the candlestick patterns indicate a mix of buying and selling pressure, with wicks forming on both ends of the candles. This suggests uncertainty in direction, with neither buyers nor sellers fully in control. The recent decline below the 50-day moving average and the inability to reclaim it quickly is something to watch closely in the coming days.
Analyst Ratings
🔎 Allegion plc (NYSE: ALLE) has recently seen a mix of upgrades and downgrades from analysts, reflecting different perspectives on the stock’s potential. The current consensus leans towards a “Hold” rating, with an average price target of $138.33, suggesting a slight upside from its current price levels.
📈 Recent Upgrades
✅ Mizuho Securities raised its price target for Allegion from $135 to $150, maintaining a neutral rating. This upgrade came after the company’s strong quarterly earnings report, which surpassed expectations. Allegion’s growth in the electronic security segment and effective cost management were key reasons for the improved outlook.
✅ Goldman Sachs also revised its price target upward from $158 to $163, keeping a buy rating. The firm highlighted Allegion’s expanding market share and successful integration of acquisitions as major factors driving optimism. Analysts also pointed to continuous innovation and the company’s ability to adapt to evolving security demands as positive long-term catalysts.
📉 Recent Downgrades
⚠️ Barclays downgraded Allegion to underweight from equal weight, lowering the price target from $122 to $116. The downgrade was largely driven by concerns over high debt levels and potential margin pressures due to rising raw material costs. Analysts questioned whether Allegion could sustain its current growth rate in an increasingly competitive industry.
⚠️ Wells Fargo also adjusted its price target, reducing it from $140 to $135 while maintaining an equal weight rating. The firm cited a slowdown in the commercial construction sector, which could impact demand for Allegion’s security products. Analysts also felt the stock’s valuation was stretched compared to its peers, leading them to take a more cautious stance.
These mixed signals from analysts suggest that while Allegion continues to show strength in its business fundamentals, external factors like market conditions and cost pressures remain areas of concern.
Earnings Report Summary
Allegion plc wrapped up the fourth quarter of 2024 on a strong note, delivering solid financial results that highlight the company’s steady growth and smart execution.
Revenue and Earnings Performance
The company pulled in $945.6 million in revenue, marking a 5.4% increase from the same period last year. This boost came from a combination of higher pricing and strong product demand, leading to an organic revenue growth of 3.5%. On the earnings side, Allegion posted adjusted earnings per share (EPS) of $1.86, which was a healthy 10.7% jump from the previous year and even better than what analysts had anticipated.
How Different Segments Performed
- Americas: The company’s biggest segment had a 4.6% organic revenue growth, fueled by strong pricing strategies and solid demand across key markets. This performance underscores Allegion’s steady position in North America and its ability to navigate changing economic conditions.
- International Markets: The company didn’t break out specific numbers for its global business, but it did note that acquisitions and currency benefits played a role in keeping this segment stable.
Profitability and Margins
One of the highlights of the quarter was Allegion’s operating margin improvement. The company managed to boost its margin by 10 basis points, signaling better efficiency and cost management. With this improvement, Allegion was able to push earnings higher without relying solely on revenue growth, a good sign for long-term profitability.
Cash Flow and Liquidity
Allegion finished the year with $582.9 million in free cash flow, a 12.9% increase from the previous year. Higher earnings and better working capital management contributed to this strong cash position, giving the company more flexibility to invest in growth and return value to shareholders.
Investments and Shareholder Returns
Throughout 2024, Allegion stayed active on the investment front, spending $137 million on acquisitions to expand its portfolio. It also repurchased $220 million worth of shares, reinforcing its commitment to delivering value to investors.
Looking Ahead
With a solid quarter in the books, Allegion is in a good position moving forward. The company continues to benefit from its strong market presence and strategic investments, setting the stage for further growth in the evolving security solutions industry. While challenges like economic fluctuations and supply chain pressures remain, Allegion’s solid financials give it a strong foundation for whatever comes next.
Financial Health and Stability
Allegion’s ability to sustain dividends relies on its overall financial stability. Looking at key profitability metrics, the company remains in a strong position.
Profitability and Efficiency
- Profit Margin: 15.84%
- Operating Margin: 20.72%
- Return on Assets (ROA): 11.25%
- Return on Equity (ROE): 42.39%
Allegion has an impressive return on equity, indicating that it effectively generates profits from its assets. The strong operating margin suggests efficient operations, which is critical in maintaining a stable bottom line.
Balance Sheet Strength
- Total Cash: $503.8 million
- Total Debt: $2.15 billion
- Debt-to-Equity Ratio: 143.31%
- Current Ratio: 2.04
One area investors should watch is Allegion’s debt level. The company has a high debt-to-equity ratio, which means it relies heavily on borrowing. However, with over $500 million in cash and a strong current ratio of 2.04, Allegion has the liquidity needed to manage its financial obligations.
Valuation and Stock Performance
Valuation Metrics
- Trailing P/E Ratio: 18.15
- Forward P/E Ratio: 16.03
- PEG Ratio (5-Year Expected): 1.71
- Price-to-Book Ratio: 7.12
- Enterprise Value/EBITDA: 13.24
From a valuation standpoint, Allegion appears to be fairly priced. The forward P/E of 16.03 suggests investors are paying a reasonable multiple for future earnings growth. Meanwhile, the PEG ratio of 1.71 indicates that the stock is not overly expensive relative to its expected earnings trajectory.
Stock Performance
- Current Price: $126.37
- 52-Week High: $156.10
- 52-Week Low: $113.27
- 50-Day Moving Average: $130.30
- 200-Day Moving Average: $132.78
Right now, the stock is trading below both its 50-day and 200-day moving averages, which signals a potential downtrend or consolidation phase. However, given its 52-week range between $113.27 and $156.10, Allegion has room to recover if earnings momentum continues.
Risks and Considerations
High Debt Levels
Allegion’s debt-to-equity ratio is relatively high. While manageable for now, rising interest rates could increase borrowing costs. Investors should keep an eye on how the company handles its debt obligations.
Economic Sensitivity
Since Allegion’s business is tied to construction and security infrastructure, economic downturns could affect demand. A slowdown in commercial real estate development or reduced spending on security upgrades could impact revenue.
Competitive Industry
Allegion operates in a competitive space, facing challenges from both traditional security companies and newer, tech-driven entrants. Staying ahead will require ongoing innovation and investment in emerging security technologies.
Stock Price Volatility
With the stock trading 20% below its 52-week high, there is some volatility to consider. While this could present a buying opportunity, it’s important to assess market conditions before making any investment decisions.
Final Thoughts
Allegion plc is a solid choice for investors looking for steady dividend growth and financial stability. With a low payout ratio, strong earnings, and a history of dividend increases, the company is well-positioned to continue rewarding shareholders over the long term.
The dividend yield of 1.65% may not be the highest, but its consistent growth and financial strength make it a reliable option for those seeking income and stability. While debt levels are something to monitor, Allegion’s cash flow and profitability suggest it has the resources to manage its obligations effectively.
For investors focused on dividend growth rather than high yield, Allegion remains an attractive name in the security solutions industry.
Recent Comments