A cheap FTSE 100 dividend growth stock I’d buy and hold for the next decade
If you’re a share picker seeking hot earnings growth and inflation-busting dividend yields, then you could do a lot worse than to check out GVC Holdings(LSE: GVC).
I don’t have to tell you how fast the online gambling segment is growing. This has helped earnings at this particular FTSE 100 business surge by double- and even triple-digit percentages in recent years, and City brokers are expecting another impressive improvement in 2018. A 60% rise is forecast, to be specific.
A quick look at GVC’s latest trading statement earlier in September explains why the number crunchers are so optimistic.
Internet sensation
In the six months to June, the FoxyBingo and partypoker owner saw net gaming revenues (NGRs) on a pro-forma basis rise 8%, to £1.7bn, while underlying EBITDA on the same basis leapt 11% to £349.5m.
It’s easy to see why the board was enthusiastic enough to lift the interim dividend 10% year-on-year to 16 euro cents per share. With GVC’s Online division winning market share in all of its major territories (pro-forma) NGRs here jumped 18% in the first half, with NGRs at its Sports and Games internet brands jumping 19% and 13% respectively in the period.
The buzz created by the World Cup during the summer has helped to drive activity at the gambling Goliath in recent months, while the introduction of new products has also piqued punter interest. What’s more, the acquisition of Ladbrokes Coral in March has also boosted GVC’s position in the online segment, with NGRs at its former rival’s brands rising 14% from January to June.
Stateside statement
The next exciting stage in the Footsie firm’s growth story comes from its decision to enter the US marketplace through a tie-up with MGM Resorts International, following key regulatory changes to the betting market by the Supreme Court.
Indeed, the British business itself this month commented that “the combination of MGM’s leading brands together with GVC’s proprietary technology, and both businesses’ combined betting and gaming expertise, puts the group in the best possible position to benefit from what could become the world’s largest regulated sports-betting market.”
The accord gives GVC operational licence to operate in 15 states with a cumulative addressable population of 90m Americans. It’s early days following the Supreme Court’s recent groundbreaking decision, but leisure industry consultancy firm Global Market Advisors suggests that gross gaming revenues in the country could be worth $9bn.
Great value, growing dividends
At current prices, GVC trades on a forward P/E ratio of 12.1 times which I believe makes the firm a steal. The nature of its operations carries huge regulatory risks, of course, but I believe these fears are overdone and that the market is underestimating the company’s terrific growth possibilities.
Besides, those looking for strong and steady dividend growth should also be interested. Last year’s dividend of 34 euro cents per share has been raised to 39 cents in the current year, resulting in a chunky 3.6% yield. And I’m expecting shareholder payouts, like profits, to keep expanding at a decent pace as the global online betting industry grows.
Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money.
The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. 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.
///>
