I continue to be amazed at the number of publicly traded companies that have quite mundane-seeming businesses and yet are able to achieve market-boosting returns.
One of the many examples of this phenomenon is Oil-Dri of America (NYSE: ODC). Oil-Dri is a leading, vertically integrated manufacturer and marketer of sorbent minerals (clay) and related products.
While no part of this company description jumps off the page and screams about “market-beating potential,” Oil-Dri’s stock has tripled in the last two years. Since 2000, it has almost tripled the economy’s total return S&P500 index, becoming a 16-bagger.
As promising as these past returns have been, I believe Oil-Dri’s future could prove even brighter. Here’s what the little-known dividend growth stock does and why it appears positioned to continue beating the market for decades to come.
Oil-Dri has been on Forbes’ list of ‘America’s Most Successful Small Companies’ for two years in a row and appears to be finally gaining the market’s well-deserved attention. The company has been mining clay since 1963 and currently has facilities in six US states, with reserves expected to last at least another 40 years.
Powered by these clay mine locations, Oil-Dri serves the following markets:
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Pet care (55% of sales): Oil-Dri has patents on lightweight scoopable cat litter that it sells under the brands Cat’s Pride, Jonny Cat and KatKit. However, after acquiring Ultra Pet in 2024, the company entered the crystal litter niche, whose superior performance is leading to a rapid rise in popularity among cat owners.
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Fluids purification (21% of sales): Oil-Dri’s clay products allow customers to process vegetable oils, edible oils, jet fuel and biodiesel. They also have adsorbents that remove metals for the renewal diesel market.
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Industrial and sporty (10% of sales): If you’ve ever seen pebbles on the floor of a mechanic’s shop or your grandpa’s garage, chances are they’re Oil-Dri’s granular clay absorbents, which prevent spills or leaks . Meanwhile, the company’s clay helps drain sports fields and also builds pitching mounds and batting boxes on baseball diamonds.
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Agriculture and horticulture (8% of sales): Agsorb and Verge granules from Oil-Dri help nourish and protect plants and crops.
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Animal health (6% of sales): The company’s Amlan International unit produces natural feed additives that keep animals healthy and protect them from toxins.
Although Oil-Dri competes with many competitors in these markets, its vertically integrated operations give the company an advantage. In addition, most of the company’s products are recurring purchases and “staples” for the customers it serves, making sales relatively stable and robust for an industrial company.
Oil-Dri’s combination of promising growth opportunities and rapidly improving profitability are the qualities that make me optimistic about Oil-Dri’s future.
After acquiring Ultra Pet for $46 million in May 2024, the company expanded into the fast-growing crystal cat litter market. This crystal litter market has grown almost fivefold since 2018 and saw sales volume grow eight times faster than all other types of litter last year.
Oil-Dri already has a market share of 31% and 79% respectively in the lightweight clay waste niches of branded and private label products, and is now looking to create the same magic in the crystal waste industry through Ultra Pet. In addition to this potential, the company recently received the first-ever Environmental Protection Agency-approved antibacterial cat litter that kills 99.9% of odor-causing bacteria, further setting it apart from its peers.
Meanwhile, renewable diesel production in the U.S. has increased from 800 million gallons in 2020 to 6 billion gallons in 2025, making Oil-Dri’s liquid purification products even more important. When used as a drop-in fuel, this renewable diesel reduces greenhouse gas emissions by up to 80%. Oil-Dri has commissioned new plants to meet growing industry demand, which should continue to drive further growth.
The best part yet for investors is that these growth areas are not being developed at the cost of reduced profitability. In fact, profitability is increasing while the company is expanding.
Much of this stems from the company’s focus on improving its sales mix, a process it calls “Moneyball.” On Oil-Dri’s first quarter earnings results, Chief Financial Officer Susan Kreh made this point, explaining: “So it’s a money ball for a mining company that’s really focused on value-add products and actually taking some of the things out of the portfolio that are important.” not profitable.”
Thanks to this focus, the company’s margins continue to reach new highs unseen in more than two decades.
This improving profitability helps fund a 1.4% dividend yield, using just 18% of the company’s net profit. In other words, Oil-Dri could triple its dividend payments and still use only half of its profits. While management has historically been conservative with dividend increases, the latest increase was 7%, suggesting the dividend can grow faster over time alongside profitability.
Oil-Dri trades at just 14 times earnings, but has been growing sales at 10% per year – and 15% in the previous quarter – for the past five years. It could be a bargain if it can prove this profitability is here for the long term.
Consider the following before buying shares in Oil-Dri Of America:
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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Meet the Little-Known Dividend Growth Stock That’s Soaring 218% Since 2022 Originally published by The Motley Fool
