One FTSE 100 dividend stock I'd buy and one I'd sell

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Marks & Spencer shop

I am convinced that a strong US economy makes Ferguson(LSE: FERG) one of the FTSE 100's most exciting growth dividend shares.

A strong record of recent earnings expansion has seen shareholder rewards grow at a compound annual growth rate of 11% during the past four reported years. And the City expects the plumbing play to keep growing dividends at a terrific rate.

With earnings expected to have advanced 19% in the year ended July 2017, a payout of 114.8p per share is predicted, up from 100p in the prior period. And this is expected to charge to 126p in the current period, supported by another 8% profits improvement. As a consequence Ferguson (known as Wolseley until the summer) boasts a very handy 2.7% yield.

In its most recent trading update Ferguson advised that total like-for-like sales rose 6.6% in the three months to April, with revenues on a comparable basis over in the States shooting 8.5% higher. The region is responsible for two-thirds of group turnover.

The firm noted "US residential and commercial markets growing well and industrial markets improving," but this was not the only cause for celebration as like-for-like revenues also expanded at a decent rate in Canada, Central Europe and the Nordics, offsetting stagnation in the UK.

I believe that improving momentum in its markets, and especially in the US, makes Ferguson a great share to buy right now, particularly given its undemanding forward P/E multiple of 14.8 times.

Leave it hanging

I'm not exactly bowled over by the investment potential of Marks & Spencer (LSE: MKS), however, given that already-flaky demand for its fashion looks likely to worsen as conditions become tougher on the UK high street.

Latest retail data last week from the Office of National Statistics smashed past analysts' expectations, a 1% sales rise in August beating the predicted 0.2% advance by some distance. But I remain concerned that rising inflation (August's reading of 2.9% crept back to June's four-year peak) could see takings across the broader retail sector come under increasing pressure.

And as I have also already said, shopper appetite for M&S fashion ranges haven't exactly been the flavour of the month for what feels like an age now, its womenswear products still claimed by many to be overpriced and unfashionable when stuck up against its rivals.

With competitive pressures rising too, and particularly online, it is hard to see sales at M&S picking up steam. Clothing and homeware sales dropped 1.2% in the 13 weeks to July 1, according to the company's latest trading statement.

City brokers expect the London business to endure a 10% earnings slip in the 12 months to March 2018, but to follow this with a slight 2% improvement the following year. I am not so optimistic and reckon the firm could be set for prolonged profits trouble, making it an unattractive stock selection despite its low forward P/E ratio of 12.7 times.

I reckon this murky backdrop should also deter dividend chasers. The number crunchers expect M&S to chop the 18.7p per share reward of recent years to 18.3p this year and next, and although this still results in a yield of 5.3%, investors should be prepared for more swingeing cuts in my opinion.

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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.