In the last five years, earnings per share (EPS) at ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) has increased 340%. Dividends in the same period are 125% ahead. That represents average compound growth in EPS of 34.2% and dividend growth of 17.6%. In fact, the dividend story is even better — ARM has 10 years of successive increases behind it, with more forecast.
ARM’s success has been built on its world-leading position as a designer of small, low-power computer chips. The company experienced a step-change in demand for its devices following the development of the smartphone. Another leap forward came with the mobile tablet boom.
ARM’s growth comes at a price. Even with more earnings rises forecast, the shares are still trading at 31 times 2014 expected EPS.
The world’s largest caterer, Compass Group (LSE: CPG) has put a lot of food on the tables of its shareholders. In the last ten years, dividends at the company have increased by an average of 11.6% a year. The dividend growth record in the last five years has been even better, rising at an average rate of 15.6% per annum.
Even better, earnings growth has outstripped this. In the last five years at Compass, EPS has grown 22.1% a year on average.
Revenue from other support services has increased fourfold in the last six years.
Compass shares trade on a forecast P/E for 2013 of 18.3 with an expected yield of 2.7%. Earnings and dividends are expected to grow by approximately 10% in 2014.
Like Compass, Serco Group (LSE: SRP) has grown fast by supplying customers with outsourced services. Serco provides a larger range than Compass however — from Community Payback for offenders in London to air traffic control in the UAE.
Serco has managed to grow EPS by 18.8% a year for the last five years. In that time, dividends have risen at a near-identical rate. Expectations are for earnings and dividend growth to continue this year and next. That puts Serco shares on a 2013 P/E of 15.3, falling to 13.9 times next year’s forecast. The expected dividend yield for this year is 1.8%, rising to 2.2% in 2014.
Serco’s track record and the long-term nature of much of its business has seen the shares be rewarded with a premium rating. If you are searching for companies that will continue to reward investors for decades, check out the latest Motley Fool research report “5 Shares For The Long Run”. This analysis is totally free and will be delivered to your inbox immediately. Just click here to get your copy today.
> David does not own shares in any of the above companies.
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