For those seeking reliable dividend growth in the years ahead, I think Britvic (LSE: BVIC) is one of the best firms that the FTSE 250 has to offer.
Strong earnings visibility is the key to sustained payout expansion and, thanks to the evergreen appeal of its much-loved beverages like Robinsons, Purdey’s and Lipton, it can bank on profits continuing to rise even in the event of tough trading conditions.
This is certainly evident right now, the Hertfordshire-based business reporting in late January that UK revenues rose 1% during the three months to October as its carbonates division, driven by Pepsi Max, continued to outperform the broader market (carbonate sales in Britain jumped 4.9% last year).
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What’s more, Britvic is determined to continue grabbing share in the soft drinks market by keeping its conveyor belt of new products rolling. It has plans for a string of new Robinsons-branded products slated for release in the current quarter alone.
As I wrote earlier, the UK sugar tax which comes into effect in April creates some uncertainty for drinks manufacturers looking ahead. Having said that, I am confident the aforementioned brand power of Britvic’s labels should allow it to largely pass these costs onto its customers without too much fuss. And over a longer time horizon, the company’s commitment to innovation should make the levy less and less of an issue.
The Brazil nuts
Another feather in Britvic’s cap is its aggressive expansion strategy, and in particular its move into the emerging markets of South America.
Sales are under pressure in its Brazilian marketplace at the moment, “reflecting the continuation of the challenging consumer environment,” as Britvic noted last month (organic sales ducked 6.5% during the last quarter).
But in the years ahead I am confident that this territory should power its earnings to the stars as personal affluence levels and population numbers boom.
In the meantime, group earnings are expected to rise 1% in the year to September 2018 and 5% in the following year, keeping its long-running growth record in business. And so dividends are expected to keep stepping higher too.
Last year’s 26.5p per share reward is predicted to rise to 27.3p in fiscal 2018, and again to 28.7p next year. As a consequence, yields for this year and next stand at a meaty 4% and 4.2% respectively.
A dividend gift
I believe that 4Imprint Group (LSE: FOUR) is also a dividend share to buy and hold onto in the years to come thanks to the brilliant progress it is making in the US.
A string of double-digit earnings improvements has helped dividends to almost double during the past five years. This strong growth record also explains the marketing gift maker’s high forward P/E ratio of 20.8 times. And City analysts are expecting shareholder rewards to continue swelling.
In 2017 the payment is expected to have advanced to 58.2 US cents per share, and this is predicted to keep climbing to 65.5 cents this year and to 72.5 cents in 2019 (supported by predicted earnings rises of 19% in 2018 and 9% in 2019).
Yields may not be as impressive as Britvic’s, ringing in at 2.5% and 2.7% for 2018 and 2019 respectively. But I think those seeking reliable dividend growth still need to give 4Imprint a close look.
