When it comes to dividend shares, I’m more interested in consistent returns than exciting businesses and sporadic payouts. High yields are more often than not a red flag, for me at least. However, it’s always worth noting that dividends are never guaranteed.
With that in mind, two consistent stocks I reckon investors should be taking a closer look at are Bunzl (LSE: BNZL) and Howden Joinery Group (LSE: HWDN). Here’s why!
What they do
Bunzl is a business with roots stretching back over 100 years. Although it has changed over the years, the company now focuses on food package delivery and cleaning products.
Howden is one of the UK’s largest kitchen manufacturing and joinery specialists with a wide presence across the country. It sells its products to trade customers, as well as direct to consumers through its many depot locations.
Bunzl’s investment case
Diving straight into the subject of returns, Bunzl currently offers a dividend yield of 2.3%. This is a great example of a yield that doesn’t get my pulse racing. However, what does excite me is the firm’s track record, as it has raised annual dividends for dividends.
When it comes to passive income, safe and steady increases excite me more than sporadic payouts with high yields. However, it is worth mentioning that past performance is never a guarantee of the future.
One of Bunzl’s biggest draws for me is its size, scale, and experience. With a presence in over 30 countries, and sticky relationships with the majority of its customers, it possesses defensive abilities, if you ask me. This is because the products it offers are essentials. This has allowed the business to generate steady earnings and reward shareholders for years.
From a bearish view, Bunzl’s performance has been hurt in the past, and recently too, based on a trading report released last week, due to economic turbulence. Higher inflation and weaker consumer confidence has led to a drop in spending across its products. This is something I’d keep an eye on, as it could hurt potential returns in the future.
Howden’s investment case
The business has grown quietly into one of the largest suppliers of its kind over the years. This has allowed it to return cash to shareholders consistently. The shares currently offer a dividend yield of 2.3%.
Like Bunzl, Howden has a good track record of payouts in recent years. It has increased its dividend per share for the past four years. Furthermore, before the pandemic, it was on an eight-year streak.
In terms of looking forward, Howden has developed a stellar reputation in the trade, which has allowed it to grow earnings. Due to the current housing shortage in the UK, I reckon the business is primed to continue growing, which should in theory, boost earnings, and investor returns.
The natural risk for Howden is being at the mercy of inflation linked to the vital raw materials it needs to manufacture its products. Higher costs could result in tighter margins and smaller dividends. However, with the current housing shortage mentioned, and popularity of its products and wide presence, this is not something I’m too concerned about.
