The best kind of passive income is surely the sort that grows over time. When applied to the stock market, this happens when companies manage to lift their dividends year after year. Today, I’m looking at two examples from the FTSE 250 that have managed to do just that.
Tasty half-year numbers
Mid-cap meat supplier Cranswick (LSE: CWK) might not be a glamourous business. But it’s been a brilliantly-reliable source of rising dividends for shareholders. In FY19, the total payout came to 55.9p per share. In FY24, it was 90p per share.
Based on the latest set of interim results, I think this form looks set to continue.
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Revenue rose 6.1% to £1.33bn in the six months to 28 September. At £95.8m, adjusted pre-tax profit was a little over 17% higher.
Part of the reason Cranswick keeps posting higher numbers (and raising dividends) is down to its growth strategy. As a result of ongoing investment, the firm boasts the largest pig farming business in the UK. It also continues to expand its poultry division which now accounts for 19.5% of total sales. The recent foray into pet food appears to be going well too.
Why the fall?
Despite today’s encouraging update, the shares have fallen almost 5% in trading.
At least some of this might be due to management stating that the outlook for the rest of the financial year (ending 29 March) was in line with market expectations. Given that the shares were already trading at 19 times forecast earnings, investors were possibly hoping for an upgrade to guidance.
Still, there’s nothing in today’s statement that gives me real cause for concern (even though the growing popularity of plant-based sources of protein is one potential risk I’m keeping my eye on). Demand from consumers appears robust and the firm’s Christmas order book is “strong“.
Tellingly, management also elected to raise the interim payout by 10.1% to 25p. That screams confidence to me.
At just 2% or so, Cranswick’s forecast dividend yield might be average but this is arguably balanced out by the £2.8bn cap’s excellent long-term performance.
If the shares continue losing value in the weeks ahead, I may well tuck in.
Back on track
Another mid-cap with a fine record of growing dividends is self-storage giant Safestore (LSE: SAFE). As with Cranswick, I think this looks set to continue.
Revenue performance “improved” in Q4, allowing management to declare that the company had “returned to growth overall” in FY24. This is despite demand from small business customers being more subdued than in 2023.
Wobbly economic backdrop aside, trading has also been “steady” across the Channel in France.
Tough times
As things stand, the shares yield 4%. That’s more than I’d get from just buying a bog-standard fund that tracks the return of the FTSE 250. I also like that Safestore has 26 more stores in its development pipeline as it slowly expands into Continental Europe.
That said, I’m conscious that the real estate sector could be set for more short-term pain if inflation continues to bounce, prompting the Bank of England to pause interest rates cuts. Indeed, this goes some way to explaining the near-13% drop in the share price in the last month.
For this reason, I’m keeping Safestore on my watchlist for now.
