2 FTSE 100 heroes with 10 years of constant dividend growth

When examining dividend stocks, don't just look at the income you are getting today, check what you might get tomorrow. This means looking for companies that have a strong track record of increasing their dividends, year after year.

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You've got the Power

A total of 26 FTSE 100 stocks have increased their dividend every year since the financial crisis in 2007, according to online platform AJ Bell. Paddy Power Betfair(LSE: PPB) is one of them, and the impact on your total returns simply cannot be understated. Over the last decade, its share price is up 290.8%, against just 12.8% on the index as a whole. That would be good enough on its own, but once you include re-invested dividends, it becomes nothing short of spectacular.

It has delivered an impressive 16% of annual compound dividend growth taking the total return to an incredible 659.4% with dividends reinvested. The average total return on the FTSE 100 over that period was 63.9%. This is barnstorming outperformance.

Place your bets

Ten years of consecutive dividend growth is what makes Paddy Power Betfair such a winner. The question is, where does it go next? The last year has been disappointing, with the share price falling 7%, hit by concerns of a government crackdown on fixed-odds betting and TV advertising, as gambling addictions rise.

Yet this multi-brand, multi-channel, multi-jurisdictional business remains in winning form, recently reporting a 35% rise in underlying earnings and making a fat dividend payout. Paddy Power does look expensive at 25 times earnings, but last time I'd looked it was 30. Earnings per share (EPS) look sluggish at 2% this year but should fly 13% in 2018. Remember, dividend growth is favourite to win this race.

Smell the coffee

Hotel and restaurant company Whitbread(LSE: WTB) is another big dividend winner. Its share price is up 118.9% over the past decade, but it has been turbocharged by its annual compound dividend growth rate of 10.1%. This takes the total return to 179.4%, not quite at Paddy Power's heady levels, but worth a celebratory drink anyway.

I tipped Whitbread four years ago, arguing that is strong financial position, big brands, mainstream target market, Asia growth targets and robust management gave it plenty of depth and body. It quickly recovered from the Brexit shock, as spending on eating out remained resilient, although consumer activity has been slowing lately.

Premier income play

Tourist spending has held up in London, helped by the weak pound, but could take a hit with sterling now strengthening. Whitbread, which owns Costa Coffee and Premier Inn, could see its hotel business soften if a large chunk of the City shifts to the continent after Brexit, although the future on this front is unclear.

Whitbread's recent Q3 update showed sales up 8.3%, or 1.9% on a like-for-like basis for the financial year-to-date. Forecast EPS growth of 6% and 8% over the next two years looks juicy, and although the yield is a so-so 2.4% it is well covered and management is committed to growth. Whitbread looks solid at a forecast 16.1 times earnings, but Paddy Power is the racier bet.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Paddy Power Betfair. 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.