Two FTSE 100 stocks I’d buy when I next have some spare cash to invest are DCC (LSE: DCC) and Croda International (LSE: CRDA).
FTSE 100 stocks with solid dividend records
When reviewing dividend stocks, I bear in mind a few things. A high yield may look good on paper but it tells me one of two things. One is that the share price has fallen rapidly, pushing up the yield. The other is that the business is performing well, generating lots of cash and rewarding its shareholders.
I’m more interested in consistent dividend payments. Although I understand that the past is not a guarantee of the future, a firm’s dividend record is a big indicator for me. Has it paid out consistently year on year and has it increased payments? I do understand that dividends are never guaranteed.
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DCC
DCC operates a diversified business with interests in energy, healthcare, and technology.
At present, DCC shares are trading for 4,350p. At this time last year, they were trading for 4,790p, which is a 9% drop over a 12-month period. I understand many FTSE 100 stocks have fallen due to macroeconomic issues and volatility.
DCC’s yield currently stands at 4.4%, which is just over the FTSE 100 average of 3%-4%. More tellingly for me, DCC has increased its dividend for 29 years in a row! In addition to this, the shares look decent value for money on a price-to-earnings ratio of 12.
DCC’s diversification is a bullish trait I’m a fan of. This is because diversification can be a great protection during volatile times. If one area of the business is struggling, another can help offset this with its success.
Furthermore, DCC’s position in the energy market is an enviable one. It is one of the world’s leading suppliers of bottled gas. In fact, 70% of the firm’s revenue came from energy last year. Rising demand for energy could boost future earnings and returns, in my opinion.
One risk I’m wary of for DCC is its propensity for acquisitions. Acquisitions are great when they work as they can boost profile and performance. But when they don’t work, they can be costly and impact returns and investor sentiment.
Croda International
Croda is a UK-based speciality chemicals company operating in consumer care, life science, and industrial specialities.
As I write, Croda shares are currently trading for 5,142p. A year ago, they were trading 22% higher at 6,656p. Croda is another FTSE 100 stock trading lower due to recent volatility as well as performance issues.
Croda’s recent performance issues are linked to operational problems. This is one of the key risks I’m wary of. A post-Covid hangover involving excess inventory held by its customers impacted sales and profits.
Reviewing the business, it has been well run for many years with high margin levels and lots of cash. This has led the business to be able to consistently reward shareholders with dividends. At present, the yield stands at a respectable 2%.
I’m not worried by Croda’s recent issues. I see them as speed bumps during a tough trading environment amid the backdrop of a tricky economic environment too. I’m buoyed by its position in the market and diverse offering through its three primary divisions as well as its dividend record.
