They say that two things can survive a nuclear apocalypse: cockroaches and Twinkies.
But if I had to put money on either of the two, I’m going all in on the cockroach. Why? Well, here are five good reasons:
1. They are ancient
Cockroaches are believed to have originated more than 280 million years ago, in the Carboniferous era
2. They are survivors
Cockroaches can live without food for an entire month and survive up to a week without water
3. They are incredibly fast
Cockroaches can run up to three miles in an hour, which you’ve probably figured out if you’ve ever tried to stomp one
4. They grow up fast
Some species of cockroaches can become adults in as little as 36 days
5. They are badass
A cockroach can live for a week without its head. They breathe through tiny holes in their bodies, so they do not need their mouths or heads to breathe.
When renters and homeowners were asked about the major problems they’ve had with their homes, the number one problem they cited was insects. When you have roaches crawling around in your house, it becomes a priority.
People simply don’t allow their houses to be overrun with creepy crawlies.
This has led to a billion-dollar pest control industry that is steady regardless of what the stock market and the economy are doing. Since we’re facing what could be a turbulent market this year, let’s take a page from the cockroach and look at a company that has the fortitude to survive through any type of stock market crash.
Bugging Out
Pest control is big business…
Pest infestations have led to an increase of $6.8 billion in operating costs for U.S. businesses in just one year alone and an overall loss of $13.2 billion in revenue. Yes, I said billion. This includes maintenance, repairs, and total equipment replacement. This doesn’t account for the majority of businesses that claimed pests damaged their reputation and cost them a fortune in customer compensation payouts and fines.
All told, $7.213 billion was billed out for pest control services in 2013 in the U.S. alone. The market has only grown from there.
Here’s the estimated market value of pest control products and services worldwide from 2016 to 2026:
As you can see, the industry could jump to almost $30 billion in the next three years.
And we’re not just talking about cockroaches here. Termites cause over $5 billion in damages annually. Homeowners spend an average of $3,000 to repair the damage caused by termites.
Bedbugs have evolved from a rare nuisance to a worldwide epidemic. The money spent on destroying them has doubled over the past decade and doesn’t show any sign of slowing down.
These miniature monsters have been around for about 250,000 years. They have been terrorizing humans for at least 10,000 years — archaeologists have discovered bedbug fossils in Egyptian dwellings dating back 3,550 years and Roman philosopher Pliny wrote about bedbugs way back in 77 AD.
Bedbugs are so ingrained into our collective psyche that they’ve even burrowed their way into children’s bedtime routines.
“Good night, sleep tight, don’t let the bedbugs bite…”
Editor’s Note: I have never uttered this to my kids before bed, since it is such a nightmarish thought. I can still remember the first time my mom told me that terrifying poem before bed, and I couldn’t sleep for a week.
In any case, the point is that when you have bedbugs, you are going to pay to get rid of them — and pay handsomely. They are very hard to kill — these pesky parasites are known to survive up to a year on one single feeding, and they can withstand temperatures from freezing to 122 degrees Fahrenheit.
97% of pest professionals have treated bed bugs since 2018, according to the National Pest Management Association.
“Pest control companies specializing in bedbugs are making a lot of money,” according to Larry Pinto, author of the Bedbug Handbook. So, which company kills the most bedbugs, termites, and cockroaches and therefore makes the most money?
Enter the Orkin Man…
Rollins Inc. (NYSE: ROL)
Orkin is the biggest name in pest control. I’m sure you’ve seen their hilarious commercials,
witnessed their large trucks drive by, or even watched one of their popular “At Home with the Orkin Man” educational videos.
In fact, the Orkin Man is so pervasive that he even has his own Halloween costume.
Orkin is owned by parent company Rollins, Inc. (NYSE: ROL), which also holds a stable of other businesses that provide pest and termite control services to residential and commercial customers, including hotels, food service establishments, and food manufacturers.
While it is huge in the U.S., it has also wielded its bug-killing magic in Canada, Central America, the Caribbean, the Middle East, Asia, the Mediterranean, Europe, Africa, and Mexico. Since Rollins is the leader in killing pests, its stock has been largely immune to any market forces.
It is up over 400% in the past decade. Take a look at your returns, especially if you reinvested your dividends.
Wow. Rollins is killing it like it's their job (oh, right).
As for their dividend, Rollins has consistently delivered payments since 1995. The company paid dividends of $208.7 million, $160.5 million, and $153.8 million in 2021, 2020, and 2019, respectively.
While it is a modest 1.45%, that adds up over time, especially if you’re compounding it with a DRIP.
One of the reasons Rollins has continued to deliver is its history of acquisitions, which is a significant catalyst helping the company expand its global brand recognition and geographical footprint, along with boosting its revenues. The company completed 27 purchases in the first nine months of 2022. It completed 39 acquisitions the year prior.
The company recently released its fourth quarter financials, which came on steady. Here are a couple of highlights:
- Fourth-quarter revenues were $661.4 million, an increase of 10.2% over the fourth quarter of 2021, with organic revenues* increasing by 6.9%.
- Quarterly operating income was $119.9 million, an increase of 28.5% over the fourth quarter of 2021.
- Quarterly net income was $84.3 million, an increase of 26.1% over the prior year.
- 2022 earnings of 73 cents reflects 7.4% year-over-year growth. Moreover, earnings are expected to register an 8.2% growth in 2023.
Those are solid numbers from the leader in pest control. While I doubt you’ll see another 400% run over the next decade, you can rest assured that as long as bugs exist (which obviously is forever), Rollins will be a leader in the industry and continue to pull in steady revenue – and reward shareholders with a dividend.
While it is far from the most pleasant thing to invest in, the industry’s resilience during times of uncertainty is hard to match.
Godspeed,
Jimmy Mengel
The Profit Sector
Follow me on Twitter @mengeled.
