Does Ansell’s latest divestment mean a bigger dividend?

Ansell is shedding less-profitable subsidiaries from its Comasec acquisition.

Ansell (ASX: ANN) is taking its gloves off. The protection solutions corporation announced last Friday that it has successfully divested its Marigold household gloves and Comasec cleaning products to Freudenberg Home and Cleaning Solutions (FHCS), a German company.

While the deal’s dollar value clocks in at just $14.5 million, the divestment is further indication that Ansell is shedding off less-profitable portions of its 2012 Comasec acquisition. According to Ansell’s press release, the newly divested divisions offered little long-term value compared with the rest of the Comasec portfolio.

“We are delighted to enter into this agreement with FHCS and look forward to many years of ongoing partnership,” said Magnus Nicolin, CEO of Ansell.  “As our primary focus is on providing a broad range of hand protection solutions for the business-to-business market, divesting the Marigold consumer brand to FHCS is consistent with our long-term strategy.”

The divestment details also included a five-year extension of the current partnership agreement between Ansell and FHCS, which confirms that Ansell’s Malaysia facility will continue to supply cleaning products for FHCS’s portfolio.

Foolish takeaway

When a company that’s not struggling divests a subsidiary, it’s usually for the best. With no need to raise capital to reduce debt or make a last attempt at some crazy capital expenditure strategy, a divestment is almost always a clean cut to drop less-profitable portions of a company’s portfolio.

Small strategic divestments such as these might also make Ansell a more stable “cash cow” company in the future. Its share price is up 30% in the last year, putting its forecasted fiscal 2014 dividend yield at 1.9%. While that’s good for a growth stock, income investors will want more from Ansell – and a little extra cash could provide an uptick in distributions that dividend lovers will certainly welcome.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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