Leading pest control services company Rollins (ROL -1.73%) has delivered total returns (including reinvested dividends) of 12,700% since 2000. That makes it a 128-bagger -- every dollar a person invested in Rollins stock 25 years ago would have grown into $128 today.

While people might typically associate returns like these with more "exciting" investments such as Nvidia, Palantir Technologies, or even Bitcoin, Rollins serves as a perfect reminder that stocks with market-crushing potential can be found everywhere in our daily lives.

However, I'm writing this today not just to point out how good Rollins has been in past decades, but rather to highlight how good it appears likely to be in decades to come. Here are four reasons why Rollins remains one of my favorite under-the-radar S&P 500 dividend growth stocks.

1. It dominates an essential industry

Though Rollins' returns have rocketed past the market's so far this century, its non-discretionary sales make it a steady Eddie investment.

Protecting its customers from rodents and termites, among other insects and pests, Rollins has grown its sales nearly sixfold since 2000, becoming the largest operator in its niche. Just as important as this market share leadership, however, is that Rollins has a dominant mind share among current and prospective customers.

For example, its largest brand, Orkin, has the highest brand awareness in pest control in the United States. Since 50% of customers come directly to Orkin after conducting their pest control research, that brand power has helped Rollins grow its revenues faster than the industry average -- 8% over the last 15 years, compared to an industry average of 3%.

Best yet for investors, long-term tailwinds such as the boom in do-it-for-me services, rising pet ownership, and stricter sanitation regulations and standards will combine to provide plenty of future growth for Rollins.

Image Source: Getty Images.

2. It has a successful M&A playbook

Rollins' impressive track record as a serial acquirer has played a key role in turning the company into a 128-bagger. Over its history, the company has acquired hundreds of smaller or regional pest control businesses -- including 44 tuck-in deals in 2024 alone. In fact, since 2015, Rollins has spent roughly half of its free cash flow (FCF) on acquisitions.

ROL Free Cash Flow data by YCharts.

Targeting businesses that are already profitable and complementary to its operations (either geographically, culturally, or with new services), Rollins is actively consolidating the fragmented pest control industry.

Given that more than half of the pest control industry's revenue still comes from small operators generating less than $50 million in sales annually, Rollins will likely continue its acquisitive ways for decades to come.

When Rollins reported its fourth-quarter results earlier this month, it announced that it had received investment-grade corporate credit ratings from Fitch Ratings and S&P Global. This development increases the company's access to cheaper credit and makes it an even more powerful mergers and acquisitions (M&A) machine.

3. Both its margins and its dividend are growing

Rollins' additional M&A potential should excite investors since the company has a long track record of successfully integrating purchases into its network in an increasingly profitable manner. Consider the company's profitability metrics over the last two decades.

ROL Operating and Owners' Cash Profits Margins (TTM) data by YCharts.

Since Rollins is already at scale as a nationwide enterprise, each new acquisition it brings into its fold typically juices profitability as management scouts for the best complementary pieces.

Furthermore, the company's cash return on invested capital (ROIC) has averaged 34% since 2005. Cash ROIC shows how much FCF a company generates compared to its debt and equity. Rollins' cash ROIC of 34% ranks in the top 10% of S&P 500 stocks -- a position that has historically been a harbinger of future outperformance.

Thanks to its improving profitability, Rollins' management has been able to pay respectable dividends -- which yield 1.2% at the current share price -- despite its high spending on M&A. Had an investor bought $1,000 of Rollins stock in 2000 and held until today, they would now be receiving $750 annually in dividend income thanks to two decades of payout increases.

4. It always trades at a premium valuation

Perhaps the biggest issue most investors see when considering Rollins stock is its lofty price-to-earnings (P/E) ratio of 55. However, since the company historically generates higher levels of FCF than net income, its price-to-FCF (P/FCF) ratio of 44 is a more applicable metric.

While that is still roughly 50% higher than the S&P 500's average P/FCF ratio, Rollins has a 10-year history of trading around this valuation -- and has doubled the market's returns during that time.

ROL Price to Free Cash Flow data by YCharts.

Long story short, when I add shares to my Rollins position, I am paying a premium price for a premium business. However, thanks to the company's critical services and its long track record of growing sales by around 8% to 10% each year (just as it did in 2024), I believe it will keep justifying this premium in the long run.

With the pest control industry still highly fragmented and Rollins well-funded to continue adding to its stable of businesses, I'm happy to continue investing in this under-the-radar S&P 500 dividend growth stock.