Croda International‘s (LSE:CRDA) been one of the UK’s most reliable dividend shares for a long time. But the stock’s fallen a long way.

It’s now trading at a 72% discount to its 2021 highs. Yet the company keeps finding ways to return more cash to shareholders each year.

Speciality chemicals

Croda’s a chemicals company. Its products help crops grow and make beauty products and drugs do what they’re supposed to.

Importantly, barriers to entry are very high. The firm’s products are protected by regulations that make competing extremely difficult. In some cases, that takes the form of patents. Not all investors value these, but they do make it illegal for competitors to copy its products.

In others, they’re specified as part of the approval process. And that means customers aren’t allowed to change to an alternative product. That gives Croda a lot of pricing power. But despite all of this, the share price has been a disaster over the last five years or so.

Boom and bust

During the pandemic, demand for Croda’s products surged and both the stock and the underlying business did extremely well. Since then however, things have gone the other way. Part of this is customers working through excess inventories, but that’s not the only issue.

The firm also made some ill-judged strategic moves. It used its Covid-19 windfall to invest in its lipids division, but that’s been a mistake. As a result, the stock’s gone from an almighty boom to a huge bust. It’s fallen not only to its pre-pandemic levels, but well below this.

Despite all of this, the firm’s managed to keep increasing its dividend every year. Given the circumstances, that’s a remarkable achievement.

Dividends

Croda’s lifted its dividend for over 30 consecutive years. That covers recessions, wars, and several changes of leadership. The inherently cyclical nature of the business makes it even more impressive. But there are risks to consider. 

The latest increase was minimal to say the least. And the dividend was barely covered by the company’s free cash flows. That means investors need things to pick up for the business in the near future. But there are signs this is happening. 

Croda’s latest update reported signs of normalising inventory levels and that should mean demand’s set to improve after a long time.

Investing lessons

The best investors never stop learning. And Croda International has been a great source for lessons over the last few years. One is the danger of mistaking a cyclical high for a structural shift. This happened when demand soared during the pandemic.

Another’s the uncertainty that comes with complex industries. The firm’s strategy shift failed because it was wrong about the future of drug development. That’s not to say investors should avoid these entirely. But they should be clear about what the potential dangers are. 

Despite all this, the company’s been a consistent source of growing passive income. And that might also be extremely important.

Risks and rewards

Five years ago, £1,000 was enough to buy 15 shares in Croda International. Now investors get more than twice that many. There’s still risk and there’s still uncertainty, but I think the stock’s worth considering at today’s significantly discounted prices.