Sales and marketing firm DCC (LSE: DCC) is not the most visible stock on the FTSE 100, but that’s no excuse for me to ignore it altogether.
I’ve just spent 10 minutes on its website playing catch-up without quite getting a handle on its operations. I learned only that its energy, healthcare and technology divisions “enable people and businesses to grow and progress”. I guess that’s marketing for you.
Rising dividends
The DCC share price has had a tough time lately, falling 29.66% over one year and 32.31% over five years. Yet this could work in my favour, because this has left the stock trading at just 10.6 times earnings.
That’s comfortably below the FTSE 100’s forward PE of 13.2 for 2023, although it’s not as cheap as some of my favourite dividend stocks. Legal & General Group, for example, trades at just 7.49 times earning, while Barratt Developments is even cheaper at 5.69 times.
L&G and Barratt offer notably higher yields too, at 7.28% and 7.49%, respectively. DCC yields a solid 3.9%, but its shareholder payout is handsomely covered 2.4 times by earnings and with a forecast payout of 4.1%, there’s more to come.
Its recent dividend history is impressive, as it has been hiked for five years in a row, rising from 122.98p per share in 2018 to 175.78p last year.
Last week’s interim statement included Q3 group operating profit in line with expectations and ahead of last year, which management labelled “a good performance given the challenging macro environment”.
Struggles in health and beauty solutions, where customers continue to reduce inventory levels, were offset by stronger tech performance in North America.
Net debt has multiplied from £54m to £782m lately, but mostly due to acquisitions, which shows confidence in its future. Once recession fears ease the future could look a lot brighter. Wafer thin operating margins of 2.6% worry me but today’s low valuation and a solid dividend history are tempting. I’d like to buy it today ahead of the recovery but as I’m short of cash I’ll stick it on my watchlist instead.
A precious metal opportunity?
Investors in gold and silver miner Fresnillo (LSE: FRES) enjoyed a better year. Its share price is up 25.17% in this period. Yet this follows a lengthy spell of underperformance and the stock still trades 35.83% lower than five years ago.
The Mexico-focused miner has suffered a torrid start to 2023. It’s fallen 11.86% so far, while the FTSE 100 has been breaking all-time highs. Investors have been slowly losing faith after years of operational issues and guidance downgrades.
It’s not the only precious metals miner to struggle this year. Centamin and Endeavour Mining have also underwhelmed as investors play the recovery instead. Yet Fresnillo has one big opportunity. You see, silver is a key component in renewable power, off-grid energy storage, and EV charging. So its recent troubles could make now a nice entry point.
It’s more expensive than DCC, trading at 16.5 times earnings, and its dividend history is up and down. Today it yields 3.7%, covered 1.7 times. Management says 2023 silver and gold production looks positive. I’d consider buying, but only with a minimum 10-year view. I’m struggling to get really excited about it, to be honest. So, for now, it’s another one for my watchlist.
