30 years of increasing payouts! Here’s one dividend stock I like

Sumayya Mansoor wants to explore this dividend stock for her holdings and notes its remarkable payout record in recent years too.

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A dividend stock I’m considering for my holdings is Bunzl (LSE: BNZL). Let’s take a closer look at it to help me decide if I should buy or avoid the shares.

Distribution and outsourcing

Bunzl is a distribution and outsourcing business. It provides a one-stop shop across 30 countries supplying disposable paper and plastic packaging supplies to a variety of market sectors. These include retailers, food processors, wholesalers, convenience stores, and more.

As I write, Bunzl shares are trading for 2,853p. At this time last year, they were trading for 2,714p, which is a 4% increase over a 12-month period. It is worth noting that the shares have fallen 11% from 2023 highs of 3,225p in April due to macroeconomic issues.

A dividend stock with a great record but risks too

You would be hard pressed to find many stocks across the FTSE index that have raised their annual shareholder payout for 30 years in a row. Well, Bunzl has done just that. Although I appreciate past performance is not a guarantee of the future, a record such as this cannot be ignored when reviewing investment viability.

At present, Bunzl’s business model is an enviable one, in my opinion. I’ve broken it down on two fronts. Firstly, a lot of its products are essential. It provides things like rubber gloves to the medical industry and packaging to the food industry. No matter the economic outlook, these things offer Bunzl an element of defensiveness. Next, the business is excellent at cash generation. This is what has supported its exceptional dividend policy in recent years. With its worldwide presence and fantastic track record, it looks like a potential opportunity to me.

Right now, Bunzl’s dividend yield stands at just over 2%. There are higher yields out there but I’m more interested in a dividend stock that can provide me consistent and stable returns rather than high yields with a payout every so often. Of course, it is worth noting that dividends are never guaranteed.

Moving on to the bear case, Bunzl could be impacted by recent macroeconomic issues. Firstly, supply chain issues could prevent it being able to provide its products to its customers. This can impact performance and payouts.

Another issue is that of soaring inflation and rising costs. When costs rise, this can eat into profit margins which underpin payouts and growth aspirations, including acquisitions, which is something Bunzl does well to grow its profile and enhance its offering.

My verdict

For me, the bull case outweighs the bear case by some distance. Bunzl has an excellent market position and profile. Add to that its exceptional performance and payout record, it looks like a good stock to buy for passive income.

Despite potentially facing some short-term headwinds at present, I’d happily add Bunzl shares to my holdings when I next have some cash to invest. It looks like an excellent dividend stock to buy and hold for the long term for me and my holdings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl Plc. 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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