Have £2k to spend? I think this FTSE 100 dividend growth stock may help you to retire early
Bunzl(LSE: BNZL) was a share that I’d had my eye on for ages.
I finally bought into it following the sharp share price drop in the first couple of weeks of October and my dip buy has fared well so far, Bunzl’s market value hitting 18-month peaks above £24.50 per share in recent sessions.
Financial markets remain on tenterhooks and another downleg could be just around the corner as fears of a slowing global economy become more manifest. But the recent updraft in the FTSE 100 firm’s share price underlines how its exceptional defensive qualities makes it a popular lifeboat for investors in tough times like these.
Bunzl’s broad base of operations has long proved that, even in the most testing of economic conditions, it can continue growing earnings (and dividends as well, the firm having raised shareholder rewards each year without a break for more than two decades).
City analysts see no reason for its long record of profits growth to cease either. Rises of 5% and 4% are forecast for 2018 and 2019 respectively, and bubbly financials released this week gave these forecasts some additional credibility, Bunzl advising that it still expects revenues growth of between 8% and 9% in the current year and organic sales growth of 4%.
On the right track
As well as that exceptional geographic footprint and its broad range of services, the firm’s insatiable appetite for acquisitions has also been a critical component of its long-running growth story. So as a shareholder I was delighted that Wednesday’s release also contained more exciting news on the M&A front.
Bunzl advised that it had received regulatory clearance on its proposed takeover of personal safety equipment specialist Volk do Brasil, meaning that the deal is now expected to go through in January. This was to be expected, though, so more of a treat was news that it had also splashed out to acquire Denmark’s CM Supply in the past couple of months, a foodservice distributor providing disposable cutlery, cups and packaging to hotels, restaurants and caterers.
Handsome dividend growth
Over the past year or so there has been some concern over the impact of cost increases, and particularly in Bunzl’s core market of North America from where it sources more than 50% of total operating profit. However, that aforementioned pre-close statement shows that the company is handling these rises with aplomb and this bodes well for the new year.
The stage looks set, then, for profits and dividends to keep rattling higher in 2019 and probably beyond. And income chasers will be cheered to hear that City analysts agree that dividends should keep growing and by quite a pace too. The 46p per share payout of 2017 is predicted to charge to 45.9p this year, with further growth, to 52.4p forecast for 2019. Consequently, forward yields sit at 2% and 2.2% respectively.
At current prices Bunzl carries a forward yield of 18.5 times, a slight premium from the broader FTSE 100. That said, considering its reputation as a dependable earnings grower and a generous dividend stock I don’t think this is particularly expensive. It’s a terrific all-rounder to buy today and hold for years to come, and I for one plan to never sell my shares in the support services giant.
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Royston Wild owns shares of Bunzl. 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.
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