1 dividend-growing stock I’d tuck away in my SIPP without hesitation

Constant reinvestment into the business is producing steady growth and this stock is worth consideration for my long-term SIPP.

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For my self-invested personal pension (SIPP) I aim to find stocks to hold for the long-term.

That means the underlying business must have a record of trading consistency and prospects for growth ahead.

For me, pork and poultry-based food products specialist Cranswick (LSE: CWK) is a good candidate. The FTSE 250 firm has an impressive record of steady growth that reflects in the share price chart:

Meanwhile, the food sector has some defensive, cash-generating characteristics that make companies like Cranswick less vulnerable to the ups and downs of the economy. We all need to eat, after all.

An encouraging dividend record

The consistency of the business is best seen in the multi-year dividend record. Since at least the trading year to March 2018, the shareholder payment has risen every year – including through the pandemic. And City analysts expect further mid-single-digit percentage increases this year and next.

The compound annual growth rate of the dividend is running at just over 8%. And that’s just the sort of performance I’d like to lock in to my SIPP portfolio.

Cranswick released an impressive set of half-year results today, Tuesday 21 November 2021, showing revenue up just over 12% year on year and adjusted earnings per share almost 14% higher.

The directors rewarded shareholders by slapping just over 10% on the interim dividend. And that continues a well-established progression policy aligning investors with the success of the business.

Chief executive Adam Couch said the good results arose because of a relentless” focus on quality, service, innovation, and managing the cost base through the “extremely challenging” inflationary cycle.  

Looking ahead, Couch expressed optimism and explained that momentum has continued through the start of the third quarter. 

The directors are cautious about the current economic and geopolitical conditions. But they said they expect trading for the full current financial year to 30 March 2024 to be at the “upper end of current market consensus.

Positive expectations

Meanwhile, City analysts have pencilled in earnings advances for this year and next in the ballpark of 6% to 7%. So, I’m not expecting Cranswick to knock the lights out with growth anytime soon or ever. But I believe the company’s well-established habit of constant reinvestment into the business will keep delivering consistent progress for years – even if the pace is slow.

But I’m not the only investor with positive expectations about the company and that situation reflects in a full-looking valuation.

With the share price near 3,702p, the forward-looking earnings multiple for the next trading year is just over 16. And the anticipated dividend yield is a little under 2.4%. So, Cranswick isn’t delivering the highest investor income around with its current valuation.

There’s some risk here for new shareholders. Because if the business experiences any operational problems or setbacks that affect earnings the valuation could easily tick down lower.

Nevertheless, I’m focused on that rate of dividend growth and the steady multi-year trading record. So, for me, Cranswick is well worth further and deeper research now as a contender for tucking away in my SIPP.

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.

Kevin Godbold has no position in any of the shares 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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