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Forget buy-to-let! I’d buy shares in this proven dividend-growing company

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Since I last wrote about specialist social care services provider CareTech Holdings  (LSE: CTH) in December 2018, the share price has risen just over 9%.

Meanwhile, in today’s half-year results report, the directors declared a 7% increase in the interim dividend compared to the equivalent period a year earlier. And a steadily rising dividend is something shareholders are used to with the firm. Over five years it’s up almost 60%, which strikes me as a decent return for income-seeking investors.

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A “transformational” acquisition

Today’s share price close to 380p puts the forward-looking dividend yield for the current trading year to September at just over 3%. Given the company’s strong record of growing the annual dividend, I reckon a 3% yield is a decent starting point.

City analysts following the firm anticipate earnings will cover the payment a little over three times. A robust level off cover like that suggests to me the directors anticipate further growth, otherwise they might pay more cash out to shareholders rather than ploughing it back into the business.

The accounts are dominated by the October 2018 acquisition of Cambian Group, which executive chairman Farouq Sheikh describes in the report as beingtransformational” for CareTech. The integration of Cambian is “well underway” and the expected synergies from the enlarged operation are “on track.”

You can get a feel for the scale of the expansion from today’s figures. Overall revenue rose 120% compared to the year-ago number, underlying profit before tax shot up 50%, and the firm’s net asset value rose 58% to £328m. Net debt increased by 99% to £293m.

Things can get a bit blurry in the figures whenever a company first takes on a big acquisition. But like-for-like revenue in the original CareTech business went up 12% in the period and like-for-like EBITDA increased 4%. Meanwhile, underlying earnings per share increased by 7%. It seems to me CareTech is still trading well and growing organically.

The firm commissioned an independent valuation of the enlarged company’s property portfolio back in October on the date of the acquisition, which threw up a figure of £774m. I think the property backing with this share is one of its prominent attractions.

Consolidating the sector

The firm sees itself as something of a consolidator in the sector and there’s no sign it will ease off its plans to continue expanding both organically and by acquisition. As long as the firm remains profitable, keeps its borrowings under control and continues to move the dividend up, I think that’s a good thing.

As well as the benefits of an efficient operation for the firm’s care-users, this one could be a decent, cash-generating hold for long-term shareholders. I’m tempted to pick up a few shares to collect that growing dividend while waiting to see how the growth agenda plays out for shareholders.

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Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Kevin Godbold has no position in any share 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.

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