If I’d invested £10k in this world-class UK stock 10 years ago I’d have £80k today

This UK stock has smashed the FTSE 100 for the last 20 years, but Harvey Jones still thinks there’s a dividend growth opportunity here.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’ve had my eye on this UK stock for the last couple of years. It’s one of the best-performing on the FTSE 100 this millennium. Now I’m ready to buy it.

The stock in question is one of the FTSE’s unsung blue-chip heroes, construction rental company Ashtead Group (LSE: AHT).

It’s the second best performer on the FTSE 100 over the last 10 years, according to figures produced for me by investment platform AJ Bell, with a total compound return of 707.3%.

Should you invest £1,000 in Ashtead Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ashtead Group Plc made the list?

See the 6 stocks

If I’d invested £10,000 at the start of that run and reinvested all my dividends (as I always do), I’d have a thumping £80,730 today. Over 20 years, it’s done even better.

FTSE 100 growth hero

Last June, I secured a 20-year total return figure, which covered the heady days when Ashtead was smaller but growing at speed. It delivered a scarcely believable total return of 41,408%, with all dividends reinvested. That would have turned £10k into £4.56m. I still can’t get my head round that.

Sadly, Ashtead can’t repeat that given today’s vastly bigger market-cap of £25bn. Another 41,408% would turn it into a £10.4trn company by 2044.

Ashtead may be listed in the UK but it generates 90% of its revenues from the US, via subsidiary Sunbelt Rentals. It’s benefited from the Biden administration’s $1trn US infrastructure bill, by hiring out diggers, cranes, drills, scaffolding, pumps, ventilation systems to companies rebuilding the country.

The last year has been tougher, as US growth slows while a drop in hurricane, winter storm and wildfire activity hit demand for emergency response kit. 

The Ashtead share price has been flat since the board warned that full-year revenues would be at the bottom end of its 11-13% target range. It has still grown 16.08% over the last year and 205% over five, with dividends on top.

Created with Highcharts 11.4.3Ashtead Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The recent slowdown looks like a buying opportunity to me, with the group valued at 18.68 times earnings. That’s above the current FTSE 100 average of 12.7 times, but a price worth paying, in my view.

Dividend growth potential

Now here’s the killer figure. Over the last decade, Ashtead’s dividends have increased at an annual compound rate of 21.7%. It’s set to slow, with forecast growth of 8.8% in 2024 and 10.3% in 2025, but that’s still pretty good. The yield may seem low at 1.38% but with a long-term view there’s plenty of income on offer.

As ever, there are risks. The US is buried in debt and its economy may face a reckoning at some point. The dollar’s strong today, boosting Ashtead’s revenues when converted back into sterling. When the Fed starts cutting rates it may slide.

Sheer size means Ashtead cannot match past total return rates. However, CEO Brendan Horgan reckons long-term US growth remains positive due to“the increasing number of mega projects and recent legislative acts”.

I’ll add it to my portfolio as soon as I can. It would be lovely if it dips first. The risk is that it does the opposite, so I won’t hang around.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

FTSE shares: a generational opportunity to get rich?

FTSE shares haven’t rewarded investors as well as they could have done over the past decade. However, this could represent…

Read more »

New year resolutions 2025 on desk. 2025 resolutions list with notebook, coffee cup on table.
Investing Articles

Here are the latest Lloyds share price and dividend forecasts for 2025

The City's outlook for the Lloyds share price in 2025 seems positive right now, but we need to get through…

Read more »

Investing Articles

2 FTSE 100 growth stocks to consider that could help investors reach £1,000,000

Stephen Wright highlights two FTSE 100 stocks with strong growth prospects for the long term that could be ideal for…

Read more »

Investing Articles

Could Greggs shares shine in 2025?

Having given him great profits in the past, Paul Summers remains a huge fan of Greggs shares. Has the time…

Read more »

Investing Articles

Can the S&P 500 rise another 20% this year, or will the FTSE fight back?

Harvey Jones has been dazzled by the stellar performance of the S&P 500, like everyone else. Yet today he'd rather…

Read more »

Investing Articles

ChatGPT thinks this is the best FTSE 100 value stock to consider buying now

Can an AI bot help investors pick great value stocks? Paul Summers runs an experiment to find out and is…

Read more »

Investing Articles

After falling 10% last year, this passive income stock yields 9.9%, and I love it

The FTSE 100 is an absolute treasure trove for passive income seekers right now. It’s packed with top dividend stocks,…

Read more »

Happy young female stock-picker in a cafe
Growth Shares

These FTSE 100 shares boosted my portfolio in 2024. Can they do it again?

Having outperformed all his other FTSE 100 stocks last year, our writer considers whether these two stocks will do well…

Read more »