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Have £1,000 to invest? One FTSE 100 dividend stock I’d buy for my pension

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Today I’m looking at two stocks I’d rate as long-term buys for investors building a pension fund.

Both of these companies have a long track record of profitability and dividend growth. In my view they are both shares you could buy today and safely forget for 10 years.

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Family owners take the long view

There aren’t many FTSE 100 stocks that are still family-owned and run. One exception is Associated British Foods (LSE: ABF). Chief executive George Weston is a member of the founding Weston family, which controls around 55% of the group’s shares.

ABF is an old-fashioned conglomerate. It owns budget fashion retailer Primark as well as a number of food and ingredients businesses. These include Twinings, Ovaltine, Jordans and Allied Bakeries plus AB Sugar, a major global sugar producer.

Primark has been a star performer in recent years and now accounts for more than half of all profits. Meanwhile, conditions have been tougher in some other parts of the business. The group has continued to invest selectively in new opportunities, including expanding Primark into the USA.

This conservative and long-term approach is typical of family-run businesses, who don’t want to risk the wealth they’ve built up over generations. After all, I estimate that the Weston holdings generate a dividend income from ABF of about £177m per year.

Is 28% fall a buying opportunity?

Investors have started to become wary of the group’s dependence on Primark for growth. Associated British Foods’ share price has fallen by 28% over the last year.

To some extent, this caution may be justified. This week’s trading update showed that total sales at Primark are expected to have risen by 6% this year, but like-for-like sales are down by 2%. This means that the retailer is increasing its sales by adding new stores, but that existing stores are selling less.

However, management guidance is for group profits to continue growing this year. Analysts expect earnings per share to rise by 5% and have pencilled in a 6.8% dividend increase.

With the shares now trading on just 16 times earnings and offering a 2% yield, I think it could be time for long-term investors to start buying ABF.

Packing a lot of growth

Another growth stock that’s been on my watch list for a long time is Hilton Food Group (LSE: HFG). Shares in this meat-packing business rose by more than 3% on Tuesday after it reported a 25% rise in half-year sales, which rose to £863.6m.

Pre-tax profit was 20.9% higher, at £22.3m and the group’s adjusted earnings rose by 10% to 21.2p per share. This supported a 12% increase in the interim dividend, which will rise to 5.6p per share.

This strong growth was driven by a 12.7% increase in the quantity of food sold. Higher pricing on fish helped lift sales, along with the launch of a fresh food offering in Central Europe.

I’d sit tight

The group’s share price has risen by 122% over the last five years, outperforming ABF by 100%. Hilton shares don’t look cheap at all on 23 times forecast earnings.

But the group’s return on capital employed of 16% makes it more profitable than its supermarket customers or indeed ABF. These high returns fuel strong cash generation and have allowed Hilton to expand while maintaining a net cash balance.

In my view this quality is probably worth paying for. I maintain my buy rating on this firm.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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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