Up more than 15%! — this small-cap company is delivering phenomenal dividend growth

There’s more good news in this company’s interim report and it may be shaping up as a decent dividend growth stock.

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Growth stock Victorian Plumbing (LSE: VIC) has raised its dividend again! The online bathroom and plumbing products retailer just increased its shareholder payment by almost 16%.

Dividends first appeared in 2022, and they’ve been ramping up at pace ever since.

Looking ahead, City analysts expect an increase of more than 10% in the current trading year to September 2024, then 37% the year following — wow!

Trading well and a positive outlook

Today’s half-year report contains some decent figures, most of which are moving in the right direction. The company reckons it achieved further profitable growth in market share “despite a subdued trading environment, whilst investing for a transformational year”.

Earnings look set to increase by around 27% this year and 15% in 2025, and the progress of the business is being driven by the company’s strategic focus. The core business is retailing bathroom products and accessories to consumers in the UK via the firm’s online platform.

The directors reckon consumers are buying bathroom products and accessories online more and more. However, there’s “a considerable way to go” before that trend will mature.

Chief executive Mark Radcliffe thinks the business will gain further market share in the short term. It aims to take business from traditional retailers, omni-channel operators, and online competitors. Key to the success of the growth campaign is the firm’s strong brand.

Extending its market

The company improved its website in 2022 in a move aimed at driving traffic to the firm’s expansion categories. Radcliffe thinks there’s an “exciting” opportunity to increase the reach of the business with follow-on products.

For example, after buying bathroom products, customers often then go for things like tiles, lighting, décor, and kitchens. In today’s update, the company reported a 19% increase in expansion category sales to £5.6m. That represents just under 2% of last year’s overall revenue figure, suggesting further potential.

A third growth category is the market for selling retail bathroom products and accessories to trade customers such as plumbers, fitters, and other enterprises.

In the first half, trade revenue grew by 9% to just over £32m, which represents just over 11% of last year’s overall revenue figure.

What now?

The directors are focused on expanding the business and the setup strikes me as being entrepreneurial.

But there are risks for shareholders. For example, the sector is cyclical and the kind of big-ticket items being sold can be among the first postponed when economic times are tough.

There’s also some valuation risk here. With the share price near 98p, the forward-looking earnings multiple is around 17 for next year – I see that rating as being up with events.

Nevertheless, this business is delivering decent earnings growth and a rising dividend. It has the potential to expand further and seems well worth further research now with a view to owning a few of the shares.

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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