A FTSE 100 dividend growth stock I’d hold for the next decade

Royston Wild discusses one of the hottest dividend growers on the FTSE 100 (INDEXFTSE: UKX).

| 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.

Hand holding pound notes

Image source: Getty Images.

I’m confident that Ashtead Group (LSE: AHT) is a share that can continue to deliver strong and sustained dividend growth for many years into the future.

Why am I so bullish? Well, the cyclical nature of this firm’s end markets — Ashtead rents out industrial equipment primarily to the construction sector — should, on paper at least, mean that it should be suffering some temporary business bumpiness right now. But the FTSE 100 firm is showing no signs of strain at all.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Big in America

Much has been made of the increased challenges for the US economy since the latter half of 2018, most notably the strains brought by President Trump’s trade wars with China and companies bracing for multiple Federal Reserve rate hikes.

However Ashtead, which sources almost 90% of group profits from its Sunbelt division spanning the US and Canada, thumbs its nose at expectations that trade may have suffered more recently. In fact it continues to go from strength to strength as more and more companies and individuals switch from the traditional phenomenon of equipment ownership to renting instead.

Revenues at the London-headquartered company swelled 19% in the three months to January, to £1.05bn, speeding up from the 18% advance printed in the first fiscal half. And as a consequence, profit before tax swelled 17% to £254m.

Space to grow

Ashtead has said that it continues to witness “strong end markets in North America” and this is why the Footsie firm is investing increasingly heavy amounts in expanding its operations through a mixture of acquisition activity and organic investment under its ‘Project 2021’ programme. This is a scheme designed to eventually grow its store network in North America to some 900 locations.

Ashtead invested an incredible £1.29bn in the nine months to January, up from £859m in the same period last year, whilst it also hiked spending on bolt-on purchases to £491m from £315m previously.

Dividend surge

There’s no reason for income investors to fear the huge sums that Ashtead is spending to grow the business, though. The company throws up so much cash that it recently embarked on a £550m share repurchase scheme, and its net debt/EBITDA leverage at 1.8 times, falling well within its target of 1.5 times to 2 times, provides space for it to keep rewarding its shareholders generously.

City analysts certainly believe so, and therefore forecast that the exceptional dividend growth of recent years will continue. The 33p per share total dividend last year is predicted to rise to 37.9p this year and again to 41.1p in fiscal 2020.

Now subsequent yields of 2% and 2.1% respectively might not be the biggest in town, but this doesn’t dull my belief that Ashtead is a brilliant income share to buy today. I fully expect dividends to keep moving higher many years into the future as rampant expansion supercharges the bottom line.

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 has no position in any of the shares mentioned. 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.

More on Investing Articles

Senior woman wearing glasses using laptop at home
Investing Articles

SSE shares are up 15% since the market correction! Should I buy?

Jabran Khan looks at why SSE shares have been on an upward trajectory in recent weeks and decides if he…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

After crashing 29%, Spectris shares look cheap to me

After peaking at 4,167p last September, Spectris shares have slumped by over 29%. But I see deep value in the…

Read more »

British Pennies on a Pound Note
Investing Articles

Here is why I added this dirt-cheap FTSE 100 penny stock to my holdings!

Jabran Khan explains why he added this dirt-cheap FTSE 100 stock to his holdings and is excited by its recovery…

Read more »

Woman looking at a jar of pennies
Investing Articles

3 FTSE 100 penny stocks! Which is the cheapest buy?

Our writer examines three penny stocks that feature in the FTSE 100 index to ascertain whether they have a place…

Read more »

Arrowings ascending on a chalkboard
Investing Articles

Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

4 gems I’d include in my Stocks & Shares ISA

Jon Smith explains some of the top stocks he's thinking about including in his Stocks and Shares ISA a we…

Read more »

Compass pointing towards 'best price'
Investing Articles

At 85p, are Rolls-Royce shares a no-brainer buy? 

The Rolls-Royce share price look very cheap right now. And I think this might be my last chance to buy…

Read more »

positive mental health woman
Investing Articles

My £3-a-day blue-chip passive income plan

Our writer sets out his passive income plan of investing a few pounds each day in top stocks.

Read more »