The appeal of dividend income is one reason I invest in shares. But something I find even more attractive than a share with a good dividend is a share with a good dividend — that gets even better over time! That is why I pay attention to companies that seem committed to growing dividends over time.
That is sometimes known as a progressive dividend policy. I like such a policy because not only could it boost my passive income streams, it also suggests that a company’s management has confidence in its business outlook.
But I say “seem committed” because in reality nobody knows what will come next for a company’s dividends. Even a long history of growing dividends is no guarantee that a payout will keep moving up. It might even be slashed – exactly what happened at Imperial Brands several years ago.
Here are a couple of companies that have been increasing their dividends each year for decades. I would consider buying them for my portfolio because I reckon they might keep lifting their payouts in the future.
The meat and food producer Cranswick (LSE: CWK) has been on a tear lately. Consider last year as an example. Revenues were the highest ever. So were profits. So was the dividend.
Despite that, the Cranswick share price has lost over a fifth of its value in the past year. That has pushed the dividend yield up to 2.4%.
Cranswick’s growing dividend is not a new phenomenon. It has raised its annual dividend for 32 years in a row. Nor was the increase last year just tokenistic. At 8%, it was suitably meaty. Over the past decade, the Cranswick dividend has had a compound annual growth rate of 9.7%. I find that highly impressive.
Can Cranswick keep growing dividends?
What excites me most about Cranswick is not its past but its future. As the results demonstrate, the company has developed a highly efficient, consistently profitable business model. I think that could support future dividend increases.
There are risks ahead, such as a lack of abattoir workers pushing up costs and hurting profits. But I would be happy to buy and hold Cranswick in my portfolio.
Another company I think might be able to extend its impressive record of growing dividends is the conglomerate DCC (LSE: DCC).
It grew its annual dividend in 2021 as it has done for 27 consecutive years. The increase was sizeable, at 10%. The dividend has grown at a compounded annual rate of 9% over the past decade (allowing for a switch from reporting in euros to pounds).
DCC has a collection of businesses that are highly cash generative. Free cash flow last year jumped to £688m. Paying dividends did not even use up a quarter of that cash. So the company is generating a lot of money it can invest in its healthcare and technology divisions. Both recorded double-digit earnings growth last year.
The core energy business also grew profits, but only modestly. A declining demand for gas in some markets is a risk to both revenues and profits at DCC. But I think its mixture of businesses positions the firm well for a changing world. I think it can keep growing dividends and would consider buying it for my portfolio.