A top FTSE 100 dividend stock that I’d buy and hold for the next decade

This Fool has loaded up on this downtrodden FTSE 100 (INDEXFTSE: UKX) dividend hero recently. Why don’t you?

| 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.

fire isolated over black background

Image source: Getty Images.

There’s worse people for share pickers to look up and listen to than the so-called Sage of Omaha. Billionaire stocks guru Warren Buffett famously came up with the direction that we, as investors, should be “fearful when others are greedy and greedy when others are fearful.” That’s advice I’ve taken in the past couple of weeks.

Bunzl (LSE: BNZL) is a share that I’ve long admired and elected to stash the cash into following the share market washout that has enveloped the FTSE 100 in recent weeks. Right now, it remains 9% lower from the start of October, despite a slight uptick in buying interest.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The support services specialist offers a broad range of essential, everyday products and services to a vast number of industries, from hi-visibility vests for road-builders in California, to disposable gloves for food manufacturers in Turkey. And these multiple layers of diversification give it brilliant resilience — and the tools to keep growing earnings — despite the prospect of trouble in one or two sectors, or geographies.

Quietly going about its business

These defensive qualities have made Bunzl a go-to stock for investors seeking solid earnings growth year after year, and by extension share pickers seeking relentless dividend expansion. The company has lifted the annual payout for 25 years on the spin and, judging from fresh trading results released on Tuesday, it appears in great shape to keep this divine run going.

“Overall performance [remains] consistent with expectations at the time of the half year results announcement in August,” the Footsie firm said today, with revenues having risen 7% at constant exchange rates in the July-September quarter. Bunzl noted that organic growth clocked in at 4% and that acquisitions (net of disposals) contributed 3%.

In prior articles, I’ve lauded the company’s appetite for earnings-boosting acquisitions, and its success in integrating these into the broader business. And I’m also pleased to report that the business is not letting up on the M&A front as today, it also announced the takeover of Volk do Brasil, a major distributor of personal protection equipment in Latin America, for £41m.

An understated hero

Right now, Bunzl appears on course to meet City predictions that earnings will rise 5% in both 2018 and 2019, and to meet existing dividend forecasts, too.

Indeed, these positive profits predictions, along with its impressive cash generation — free cash flow remained broadly stable year-on-year at £181.6m as of June — mean that last year’s dividend of 46p per share is expected to march to 49.3p this year, before rising to 52.2p in 2019. As a consequence, yields stand at a healthy 2.2% and 2.4% for these respective years.

Clearly bigger yields can be found on the FTSE 100. But few firms from the index are better placed than Bunzl to keep growing payouts from now until long into the future.

One final thing. That aforementioned share price weakness leaves the stock dealing on an undemanding forward P/E multiple of 17.5 times. For a company of Bunzl’s proven quality, this makes it one of the best bargains around.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Royston Wild owns shares in Bunzl. The Motley Fool UK has no position in any of the shares mentioned. 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.

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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »