Within the FTSE 100 index, I see Kingfisher (LSE: KGF) as an unloved stock with attractive characteristics.
My plan would be to dive in with deeper research right now with a view to buying some of the company’s shares during March to hold for the long term.
DIY and trade supplies
This home improvement company owns a network of retail stores in the UK and continental Europe. Sales take place online too with the firm offering both delivery and click & collect services.
Of its several brands, I’m most familiar with Screwfix and B&Q and regularly use both in my role as chief fixer-upper around the house!
But is it a good idea to buy what you know? Sometimes it can be, particularly when a stock falls temporarily out of favour with investors as Kingfisher appears to be.
In fairness, the stock market isn’t completely irrational when it marks share prices down. It’s no secret that the pandemic, the war in Ukraine and the cost-of-living crisis have led to some big shifts in the general economic landscape. Sometimes it feels like we poor consumers have been financially squeezed until the pips squeak!
One of the outcomes is that Kingfisher has a volatile earnings record over the past few years. The business is sensitive to economic cycles and shocks. It’s often easy for consumers to delay spending on home improvements and repairs when financial times are tough. So it’s possible Kingfisher could see more troubled trading ahead and there’s some risk in that for investors.
An impressive dividend record
However, I’m encouraged by the remarkable strength shown in the company’s multi-year dividend record. There was a wobble in the shareholder payment during the pandemic year, but the dividend soon came bouncing back. This table tells the story:
| Year to January | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024(e) | 2025(e) |
| Dividend per share | 10.8p | 10.8p | 3.33p | 8.25p | 12.4p | 12.4p | 11.9p | 12p |
| Dividend growth | 4.04% | 0 | (69.2%) | 148% | 50.3% | 0 | (3.76%) | 0.55% |
We’ll get the final figures for that estimated dividend for the year to January 2024 with the full-year results release due on 25 March. But if the company meets its estimates, the dividend will have delivered a compound annual growth rate of around 2.76% through the period shown.
That’s not bad considering the challenging times we’ve lived through. So what will the business be capable of if economic conditions improve in the coming years? My assumption is better trading will likely happen and the dividend may move higher still.
Meanwhile, with the share price in the ballpark of 227p, the forward-looking yield for the current trading year to January 2025 is just above 5%. That looks pretty good to me. I’d be keen to lock an income stream like that into my portfolio.
Although positive outcomes are never certain, general economic conditions look set to improve in the UK and Europe, especially if inflation remains under control. For that reason, Kingfisher looks like a brilliant FTSE 100 stock to consider buying in March and I‘m keen to see the upcoming report.
