2 FTSE 100 dividend growth stocks I’d buy and hold forever

Looking for resilient companies that regularly increase their payouts to shareholders? Paul Summers focuses on two of the best from the market’s top tier.

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Since sky-high dividend yields can often be a prelude to an imminent cut, arguably a better strategy for income investors is to take positions in companies that have demonstrated an ability and willingness to consistently hike their payouts.

Distribution and outsourcing firm Bunzl (LSE: BNZL) fits the bill nicely. While some may baulk at the 2.3% yield, it’s worth highlighting that the business has regularly increased its total payout for many, many years now. Based on today’s trading update for 2018 to date, I can see this trend continuing.

According to the company, Q1 trading has been “consistent with expectations” expressed when reporting full-year numbers back in February. Group revenue rose 14% at constant exchange rates compared to the same period in 2017. Approximately 6% came from underlying growth (thanks to grocery business wins in North America) with the remaining 8% from the impact of acquisitions.

Today’s statement also included confirmation that Bunzl had made two acquisitions over the reporting period. The first — US-based Monte Package Company — supplies packaging products to fresh fruit growers. This purchase has “further enhanced” Bunzl’s presence in the agriculture sector, according to CEO Frank van Zanten.

The second — QS Nederland — “complements and extends” Bunzl’s cleaning and supplies operations in the Netherlands. The former serves those in the government, healthcare and foodservice sectors and achieved revenues of €6m last year. 

Given the possibility of management being spread too thin, companies with acquisition-friendly strategies aren’t every investor’s cup of tea. But as long as you believe that the board can continue to cope with its purchases, the stock still looks a decent buy.

It won’t shoot the lights out in terms of share price gains, but if you’re looking for a reliable, resilient buy-and-hold share, this £7bn cap still ticks the boxes, in my opinion.

Slow and steady

While Bunzl has been in the FTSE 100 since 1957, health and safety products supplier Halma (LSE: HLMA) is a relative newcomer, having accompanied online food delivery service Just Eat and packaging provider DS Smith into the top tier back in December. Assuming the company can continue to replicate the performance detailed in its most recent update (covering the period from October 2017 to March), it looks set to remain there.

With organic revenue growth “in all major geographic regions” (particularly Asia Pacific) continuing in the second half of the financial year, management now expects full-year adjusted pre-tax profit to be “in line with market expectations“.  Of its four sectors, Halma’s Environmental & Analysis arm was the standout performer.

It is no slouch when it comes to acquisitions. In December, it paid out £21m for wireless fire systems firm Argus and its exclusive UK distributor Sterling. A “strong” financial position — according to management — should allow it to continue adding to its portfolio.

Again, like Bunzl, the £4.6bn cap is very reliable when it comes to hiking its dividends. It’s done so every year for the last 37 years. Even when the impact of payouts is ignored, Halma’s stock is still up almost 150% since 2013 — a great example of what can happen if you find a market leader in an arguably dull sector and learn to sit on your hands.

While certainly not a cheap stock to buy (28 times forecast earnings for the current financial year), I continue to be bullish on the Amersham-based business’s long-term future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. 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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