Bunzl’s share price rises on profit upgrade! Time to buy for passive income?

Bunzl’s share price is continuing its recovery after a positive revision to profit forecasts. Should investors consider the FTSE 100 firm for dividends?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Man smiling and working on laptop

Image source: Getty images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Bunzl (LSE:BNZL) share price has risen by a whopping 88% over the past decade. And while it’s down since the start of 2024, the company is staging a comeback as sales and margins show signs of recovery.

I’m looking for the best passive income shares to buy in July. And Bunzl — with its 31 straight years of dividend growth — is near the top of my shopping list.

Dividend growth at Bunzl
Created with TradingView

In fact, following an excellent trading statement today (27 June), I may finally be about to pull the trigger. Here’s why.

A stable performer

Support services giant Bunzl sells a wide range of essential products to a variety of sectors across the globe. This includes food packaging to supermarkets, disinfectant to cleaning businesses, gloves to medical professionals, and hard hards to construction companies.

Put simply, its provision of everyday goods and services helps the world go round. As a result, earnings tend to be stable at all points of the economic cycle, which in turn gives Bunzl the strength and the confidence to deliver that long-term dividend growth I mentioned above.

Profit upgrade

But the company hasn’t had it all its own way more recently. Weak trading in North America has impacted revenues and margins, and this remains a threat if interest rates fail to meaningfully backtrack from current levels.

Bunzl confirmed today that sales are likely to have dipped 3% to 4% in the first half, or 0% to 1% at stable currencies. It said that “volume reductions and deflation in our US business” will likely drive revenues lower.

However, a sharp uptick in operating margins is helping to offset this problem. Indeed, Bunzl said margins are now expected to beat 2023’s levels, which in turn prompted the firm to raise its earnings forecasts for the full year.

It said that effective margin management and the benefit of acquisitions mean that “good margin growth is expected in North America in the first half of the year and very strong margin growth in the UK & Ireland and Rest of the World.”

Bunzl also said it now expects to announce “robust revenue growth” at constant currencies for the full year.

Dividend growth

YearDividend per shareDividend growthDividend yield
202368.3p+ 8.9%2.2%
202472p (f)+ 5.4%2.3%
202576p (f)+ 5.6%2.5%
202679.3p (f)+ 4.3%2.6%

So what dooes this update mean for future dividends? Well, City analysts were expecting payouts to continue rising before Thursday’s update, as shown in the table above. Today’s news is sure to reinforce their bullish estimates.

On the downside, brokers think dividends will grow at a more modest rate than in previous years. The payouts on Bunzl shares have risen at a compound rate of around 9% since 1992.

Nonetheless, dividend growth is expected to outpace that of the broader FTSE 100. For instance, AJ Bell projects a modest 2.3% rise in cash rewards (including special dividends) for 2024. This is less than half the growth rate brokers anticipate for Bunzl’s dividends this year.

And if the business can keep its recent momentum going, analysts might actually upgrade their dividend forecasts for the short-to-medium term. I think dividend chasers should give Bunzl shares a close look right now.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc and 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.

More on Investing Articles

Investing For Beginners

Here’s what the Trump auto tariffs could mean for the UK stock market

Jon Smith explains the implications of fresh auto tariffs on the stock market and flags up a UK share that…

Read more »

Investing Articles

Record £1bn profit gives the Next share price a boost. Is it still cheap?

The Next share price has been soaring ahead of sector rivals, and the latest full-year results might just give us…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

Up 16% in a day on a thrilling new forecast – can this FTSE 250 stock make investors rich again?

Harvey Jones was delighted yesterday when FTSE 250 grocery chain Ocado Group rocketed on a positive broker update. Can investors…

Read more »

Investing Articles

£10,000 invested in Tesla stock just 1 week ago is now worth…

Tesla stock has long defied logic. So despite its seemingly extreme valuation, should I hold my nose and just buy…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

Down 44% from its 12-month high, is this FTSE 250 fast-food favourite an irresistible bargain to me now?

This FTSE 250 food retailer has tumbled this year, so its share price may be seriously undervalued. To find out…

Read more »

Investing Articles

Where’s the S&P 500 headed in 2025? Here’s what the experts have to say

Our writer consults a wide range of market experts to get an idea of where the S&P 500 might be…

Read more »

Investing Articles

If an investor put £10,000 in Barclays and Lloyds shares 3 months ago here’s what they’d have now… 

Harvey Jones has been doing very nicely out of his Lloyds shares, but not as nicely as Barclays investors have…

Read more »

Investing Articles

£20k inheritance? Don’t blow it: target a second income that pays £1k a month!

Our writer reveals a strategic way to target an attractive second income by investing savings or inheritance money in the…

Read more »