1 FTSE 100 dividend share I’d buy and hold forever

Royston Wild looks at a dividend stock that should be on the watchlist of all FTSE 100 (INDEXFTSE: UKX) investors.

| 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.

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.

Bunzl (LSE: BNZL) may not be packing the sort of yields that make the heart race. But thanks to the brilliant earnings visibility created by its broad range of operations, the support services play is, in my opinion, one of the best shares out there for investors seeking relentless payout growth. After all, it has hiked the full-year reward for 24 years on the spin.

City brokers do not foresee this trend ceasing any time soon. The 42p per share dividend shelled out in 2016 is predicted to rise to 45.5p per share in the current year, helped by an anticipated 7% earnings advance. And with profits expected to grow a further 5% in 2018, dividends are expected to rise to 48.5p. These projections yield a handy-if-unspectacular 2.1% and 2.3% respectively.

Bunzl’s reputation as a growth and dividend star was underlined by latest financials in October in which it said that revenues increased 11% between July and September thanks to a mix of solid organic growth (of 5%-6%) and the 6% contribution of recent acquisitions.

And with the FTSE 100 star advising that it “expects to make further acquisitions over the coming months” (it has made 11 in the year to date), the future remains extremely bright. I reckon Bunzl is a great pick right now and fully worthy of a premium forward P/E ratio of 18 times.

Parcels powerhouse

Even as the letters market continues its inexorable decline, I believe that Royal Mail (LSE: RMG) also remains an attractive long-term investment destination, and particularly for dividend chasers.

You see, with shoppers across the globe swapping their jackets for jim-jams and making their purchases online in ever-greater numbers, demand for the courier’s services should keep on climbing.

Indeed, latest data from the Office for National Statistics this week highlighted the brilliant revenues opportunities for couriers like Royal Mail. While retail sales growth in the UK is slowing at an alarming pace (indeed, total sales actually dipped 0.3% in October), orders made through cyberspace still continue to race higher (these rose 10.3% year-on-year last month).

And the vast investment Britain’s retailers are making in their multichannel operations should keep the e-commerce market steadily expanding. Royal Mail saw parcel volumes in Blighty increase 6% in the half year ended September 24, it advised last week.

Jaw-dropping yields

Meanwhile, it can also look to its foreign operations to deliver resplendent earnings growth in the years ahead, with parcels traffic also being helped abroad by ever-improving economic conditions.

During the first fiscal half, the courier saw packages volumes at its GLS pan-European division boom shoot 9% higher. And Royal Mail has big plans to capitalise on this splendid growth market through ongoing M&A action.

Even though City analysts are predicting an earnings decline of 12% in the year to March 2018, the FTSE 250 giant’s bright long-term outlook is expected to keep dividends moving skywards. Last year’s 23p per share reward is predicted to rise to 24p in the current period, resulting in a monster 6.1% yield.

And with earnings expected to stabilise in fiscal 2019 — a 1% rise is currently predicted — the number crunchers are estimating further dividend growth, to 25p. As a consequence Royal Mail’s yield steps to an even-more formidable 6.3%.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »

Investing Articles

Billionaire Warren Buffett just bought shares of Domino’s Pizza. Should I grab a slice?

Our writer takes a look at a few reasons why Domino's Pizza stock might have appealed to Warren Buffett's Berkshire…

Read more »