Building products distributor SIG(LSE: SHI) disappointed investors in 2015 when the company cut its dividend, due to harsh trading conditions, from 4.6p per share to 3.6p. But now the firm is back on track and growing the dividend is high on management's agenda.
Today, alongside the firm's full-year figures for 2017, the company announced a dividend per share of 3.8p, up 6% year-on-year, thanks to a 4.3% rise in underlying pre-tax profit from £79.2m to £75.9m. Revenue expanded 3.8% with a recovery in demand in mainland Europe offsetting uncertainty and the "challenging market conditions" in the UK & Ireland business.
And it seems as if management is cautiously optimistic about what the future holds for the company and construction markets in general. Commenting on today's figures, CEO Meinie Oldersma said: "As the group moves into 2018, we are seeing increasingly confident markets across Mainland Europe and Ireland." And even though the UK market will remain challenging, management believes there's "considerable potential for a significant improvement in operational and underlying financial performance" across the group thanks to market tailwinds.
A return to growth
City analysts believe that the company has what it takes to build on its existing footprint and grow further in the years ahead. Earnings per share are expected to increase 17% for 2018, which should underpin a dividend hike of 11%, taking the payout to 4.1p, close to the level before the cut in 2015.
This payout looks much more sustainable than it was before. Indeed, dividend cover had fallen to just 1.3 times in 2015, leaving management with no room for manoeuvre if growth stalled. However, based on current projections, next year the payout will be covered 2.7 times by earnings per share., which in my view looks much more secure and gives plenty of scope for future growth.
Based on the City's figures, shares in Sig yield 2.7% and trade at a forward P/E of 13.5.
Page Group(LSE: PAGE) is another FTSE 250 dividend growth stock I've got my eye on today.
Earlier this week, Page reported that thanks to a buoyant global jobs market, the group's gross profits leapt 14.6% higher to £711.6m. The firm's core Europe, Middle East and Africa (EMEA) division -- responsible for around half of the overall profits -- was the most significant contributor to earnings with gross profits leaping 22.2%.
Unfortunately, due to Brexit uncertainty, the company expects its UK division to remain under pressure in 2018, but management (and City analysts) are extremely confident on the outlook for the rest of the group as the global economic recovery continues apace.
Following 2017's strong performance, analysts have pencilled in earnings growth of 15% for 2018 and 12% for 2019. Over the same period, the company's dividend distribution is expected to explode from 12.5p for 2017 to 21p for full-year 2019 giving a dividend yield of 4% at current prices. With a net cash balance of £100m as well, this payout looks exceptionally secure.
Overall, Page is undoubtedly one company dividend investors should keep an eye on, especially if you're worried about the impact Brexit might have on your portfolio.
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Rupert Hargreaves owns no share 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.