One FTSE 100 stock with soaring dividends, and one 4.5% yielder, I’d buy today with £2,000

Royston Wild discusses two dividend powerhouses, including a FTSE 100 (INDEXFTSE: UKX) giant, that could make you a fortune.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Whitbread (LSE: WTB) is a share that has proved a dream ticket for those seeking exceptional dividend growth.

Helped by a record of robust earnings expansion, the Premier Inn and Costa Coffee operator has hiked dividends by almost 50% during the past five years alone. And with City analysts predicting this run of profits improvements to continue — rises of 3% and 7% are forecast for the years to February 2019 and 2020 respectively — shareholder payouts are unsurprisingly predicted to continue their northwards march too.

A 104.9p per share reward is anticipated for this year, up from 101p last year, and a 112.5p dividend for fiscal 2020.

Yields of 2.5% and 2.7% respectively may be chubby rather than spectacular. However, Whitbread’s growth, and thus dividend outlook, is much healthier than that of many FTSE 100 shares which carry larger yields. And so the leisure leviathan is worth serious attention today from income chasers.

Cool beans

Back in April the market reacted with mild indifference over Whitbread’s plan to separate its Costa Coffee unit from the rest of the business. In my opinion, share pickers are ignoring the brilliant benefits that the demerger brings.

Calls to split the group have been reverberating for some time now so that the long-term value of the company’s hotel and coffee shop divisions can be fully realised. Both businesses are embarking on massive expansion programmes across the globe and by dividing them up, Whitbread can ensure that each unit can focus 100% on their respective growth strategies.

The demerger is set to take up to 24 months to execute, and given the rate of progress across the business there is a lot for investors to already look forward to. Last year group revenues smashed through broker expectations, up 6.1% year-on-year to £3.3bn. And Whitbread also announced an increase in its cost-cutting target to £250m over the next two years from £150m previously.

At current prices, Whitbread can be picked up on a forward P/E ratio of 15.5 times. This is far too cheap in my opinion, given the company’s excellent earnings and dividend prospects in the near term and beyond.

In the box seat

Real estate investment trust (REIT) Tritax Big Box (LSE: BBOX) is another share in great shape to dole out handsome dividends.

Under REIT rules, the FTSE 250 firm is required to distribute a minimum of 90% of its profits to shareholders in the form of dividends. So broker projections of sustained earnings growth bodes extremely well for future payouts.

The bottom line is expected to swell 12% in 2018, and this gives rise to an estimated 6.7p per share dividend, up from 6.4p last year and yielding 4.5%. Moreover, boosted by an anticipated 5% profits rise in 2019, dividends are predicted to increase to 7p, nudging the yield to a delicious 4.7%.

As I commented last time out, Tritax Big Box is in great shape to ride the e-commerce boom as fast moving consumer goods and retail giants need so-called big box units to store and ship their wares. The move to online has much, much further to run, and so I believe the space provider is worthy of a premium forward P/E ratio of 19.7 times.

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 assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »