A FTSE 100 dividend growth stock that I’d buy today and hold for the next 20 years

My Foolish colleague Ian Pierce could be found lauding the investment case for Experian(LSE: EXPN) at the start of last month.

He could see the business extending the stunning near-25% share price increase it had punched in the six months to September, and so it came to pass, the FTSE 100 consumer credit reporting agency hitting fresh record peaks just shy of £20 per share in recent days.

Global Goliath

I’m not surprised at all. Indeed, I’ve been a big fan of Experian for a long, long time now, celebrating its rising might in the US and the brilliant long-term profits opportunities created by its push into Latin America and Asia Pacific.

And my enthusiasm, like that of the broader market, was reinforced by latest trading numbers released in July. Group revenues boomed 10% at constant exchange rates in the six months to June, the firm said, with sales on a comparable basis in the US gaining momentum in the first half having leapt 13% in the period.

Experian is benefiting from the strong economic conditions on the other side of the Atlantic, something which the credit scorers are exploiting with a steady stream of new product introductions.

Looking away from North America, strong uptake of its products in its Europe, Middle East, Africa and Asia Pacific regions helped aggregated turnover at stable exchange rates boom 11%. Sales growth in Latin America was slower at 4%, but this was far from a shameful performance given the current economic difficulties in the regional powerhouse of Brazil.

I’m particularly excited by Experian’s prospects in developing markets. As leaping personal wealth levels drive demand for credit, demand for the firm’s services is only likely to jump higher and higher.

Booming profits AND dividends

In the more immediate term, things certainly look pretty rosy for Experian. City analysts are forecasting a 3% profits rise in the year to March 2019. They are predicting that the bottom line will leap 11% in the following year.

And this bright outlook leads the number crunchers to expect the data darling to keep its progressive dividend programme in business. Last year’s 44.75 US cents per share payout is anticipated to advance to 45.9 cents in the current year. Next year’s estimated profits jump is expected to propel the dividend to 49.8 cents.

Subsequent yields of 1.8% and 2% may not make Experian the most generous income stock on the market. Still, the Footsie company’s dividend projections appear on much safer ground that some of the index’s bigger-yielding beasts. This isn’t just on account of its chubby dividend cover of 2.2 times through to the end of next year either.

Experian doesn’t come cheap thanks to its forward P/E ratio of 25.4 times. I would consider such a high valuation to be a fair rating given the likelihood of strong and sustained profits (and dividend) expansion through the next couple of decades.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Experian. 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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