Dividend growth among many of the largest FTSE 100 stocks has been weak in recent years. That’s clearly not ideal for dividend investors as their income streams may not be keeping up with inflation. However, at the smaller end of the market, there are many companies growing their dividends at prolific rates. Here’s a look at two such companies.
Brooks Macdonald
Brooks Macdonald (LSE: BRK) is an independent investment management company offering a range of specialised investment management services to individuals, pension funds, institutions, charities and trusts. The group was founded in 1991 and had £10.5bn in funds under management at the end of June.
Listing on the AIM market in 2005, it’s fair to say the stock has been a fantastic long-term performer, rising from a listing price of 140p to 2,150p today, an incredible gain of over 1,400%. Investors have also been rewarded with a steady stream of increasing dividends, and while the current yield isn’t super high, at 1.9%, the payout has grown by an average of 17% per year over the last five years.
The group released audited results for the year ended 30 June today, revealing a solid set of numbers. Total discretionary funds under management increased 25.9%, pushing revenue up 12.7% to £91.7m. Underlying earnings per share came in ahead of analysts’ expectations at 115.8p, a 31.7% rise on last year, and the company hiked its dividend by another 17% to 41p per share.
Furthermore, the wealth manager announced the disposal of its property management business Braemar Estates, for a cash consideration of £1.9m. Chief Executive Caroline Connenllan commented: “The disposal of our property management business will enable us to focus more closely on our core offerings and is expected to contribute over time to improved margins.”
After trading near 2,600p in May, Brooks Macdonald’s share price has retreated by almost 20% in the last few months. At the current share price, the stock trades on a trailing P/E ratio of 18.6, which looks reasonable for a company growing at such an impressive rate. This is a stock I’m definitely going to keep an eye on.
RPC Group
Also having lifted its dividend payout by a significant amount over the last few years, is packaging specialist RPC Group (LSE: RPC).
RPC has made a string of key acquisitions recently, and that has resulted in the company’s top line surging from £1,047m to £2,747m in the space of just three years. In March, RPC announced the acquisition of Letica Group, which it believes will provide strong US exposure and a “meaningful presence outside Europe.”
Sometimes, when companies expand too quickly, they can run into difficulties integrating the businesses. A good example is cyber security specialist NCC Group, which after making several acquisitions in a short space of time, released back-to-back profit warnings as it lost major contracts. However, RPC recently advised that it will focus on integrating its recent acquisitions for now, and will not be doing any further deals this financial year, which seems like a sensible strategy to me.
The company lifted its dividend by an incredible 50% last year, and City analysts expect growth of 10.6% and 9.8% this year and next. The current yield is 2.6%, and consensus earnings estimates of 69p per share place the stock on an undemanding P/E ratio of 13.4, which looks good value to me.
