On 29 July 2019, I wrote an article saying I’d invest £2k in Kingfisher (LSE: KGF) and DS Smith (LSE: SMDS). Of course, I didn’t know the coronavirus crisis was coming. But how have those two FTSE 100 dividend stocks fared? And would I invest £2k in them today?
Benefiting from enhanced customer demand
B&Q and Screwfix owner Kingfisher had a share price near 222p back in July 2019. Today, it’s at about 266p. Shareholder dividends became a casualty of the crisis but overall, Kingfisher has been a decent stock to hold through the challenges of 2020.
In November, the company released its third-quarter update covering the period to 31 October. Chief executive Thierry Garnier said there had been “strong” sales growth across the business. Indeed, after initial challenges, the company began to benefit from Covid-19 “as consumers spent more time in their homes and focused on improving them.”
Meanwhile, Kingfisher is engaged in an intense restructuring drive aimed at boosting growth and adapting to changing retail trends, such as the swing to internet sales. Looking ahead, Garnier reckons the firm is building “a strong foundation for long-term growth.”
City analysts expect dividends to crank up again next year. And with the share price at 266p, the forward-looking yield is just above 3.4%. I’d still buy some of the shares today.
Expanding to serve a fast-growing sector
Corrugated and plastic packaging supplier DS Smith had a share price of near 383p in July 2019. Today, it’s at 368p as I write. And shareholder dividends were stopped when the pandemic arrived, as with Kingfisher. Overall, the stock has carried its shareholders through the crisis quite well with little loss to the value of their invested capital if they held until today.
However, the half-year results report released today contains some dire-looking figures reflecting the worst the crisis had to throw at the business so far. But looking ahead, chief executive Miles Roberts is optimistic about the long-term outlook for the business. And he explained that in the second quarter, the company saw “real momentum” in corrugated box volumes and profitability. And that’s continued into the second half of the firm’s trading year.
DS Smith serves the growing fast-moving consumer goods (FMCG) and e-commerce sectors. The business has been expanding. And the company has a strategy of building new packaging-plant facilities in order to capture higher sales from increasing demand.
I think the future looks bright for DS Smith, so I would buy some of the company’s shares now. Meanwhile, City analysts have pencilled in the resumption of shareholder dividend payments. And with the share price at 368p, the forward-looking dividend yield for the trading year to April 2022 is around 3.9%.
I’d aim to hold the shares for at least five years and probably for much longer than that. And my expectation would be for dividend income that grows a bit each year. And capital appreciation from a share price rising to reflect ongoing underlying operational progress.
