Forget the cash ISA, this cheap FTSE 100 dividend growth stock could help you to retire early

Royston Wild looks at a top-tier FTSE 100 (INDEXFTSE: UKX) income stock that could boost your finances.

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Those seeking to boost their income won’t get much value from a cash ISA, but ‘classic’ value stocks with bright dividend outlooks are a better bet so investors may want to give DCC (LSE: DCC) a close look.

The support services giant’s desire for acquisitions has already delivered sparky earnings expansion, and DCC is showing no sign of slowing down on this front. Just last week it snapped up Canada’s Jam Group (a sales, marketing and services provider to the professional audio, musical instruments and consumer electronics product sectors), marking the second such takeover at its DCC Technology arm in the North America region in less than three months.

An aggressive approach to M&A has kept profits on an upward charge in recent years, so there seems little reason to expect DCC to change course any time soon. Latest financials this week underlined the rationale behind such a strategy — for the six months to September the company said that it expects that “group operating profit will be well ahead of the prior year, driven by acquisitions completed in the prior year.”

A proven dividend hero

The FTSE 100 businesses’s long history of strong and sustained earnings growth has allowed it to light a fire under dividends over the past several years. It’s hiked the annual payout for 24 straight years since its IPO back in 1994, and by 60% during the past five fiscal periods, culminating in the total reward of 122.98p per share for fiscal 2018.

With the City anticipating additional profits expansion in the medium term — advances of 17% and 5% are predicted for the years ending March 2019 and 2020 respectively — dividends are expected to keep ripping higher at a sprightly pace. A 136.9p reward is anticipated for this year and a 146.3p payout for next year, figures that yield a handy 1.9% and 2% respectively.

It’s also good value for money. A forward P/E ratio of 19.1 times is a bit heady on paper, sitting above the widely-accepted value region of 15 times or below. However, a corresponding PEG reading around or below the bargain benchmark of 1, in this case 1.2, suggests that it is in fact attractively priced relative to its anticipated growth trajectory.

It’s clearly not the biggest yielder, but for those seeking reliable dividend increases year after year, DCC is hard to fault.

Eateries star

I’d like to draw your attention to SSP Group (LSE: SSPG), another London-quoted dividend growth share releasing bright trading news last week. The business — which operates food and beverage outlets in airports and rail stations across 30 countries — pumped out news of another satisfying quarter and expectations of a 2%-3% like-for-like sales rise in the year to September 2018.

City analysts are expecting earnings to keep booming by double-digit percentages and they are predicting rises of 19% and 11% for fiscal 2018 and 2019 respectively. It’s hardly a shock that SSP is predicted to keep lifting dividends at quite a pace too.

Last year’s 8.1p per share payout should climb to 10p for the period just passed, and again to 11.2p in the current year, resulting in a forward 1.5% yield. As with DCC, yields might not be the biggest, but as commercial flight demand grows steadily across the world, SPP could prove to be a wise selection for growth and income seekers alike. In my opinion it’s a great selection in spite of its high prospective P/E multiple of 27.6 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 owns shares of SSP Group. 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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