Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year mean he’s ready to buy?

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I like owning FTSE 100 shares that pay me dividends. I like it even more if those dividends grow. I like it so much more still if that growth lasts for decades.

There is a caveat though. Although I like shares with great dividend track records what I want to buy are ones I think have great dividend prospects – without overpaying for them.

UK Dividend Aristocrat

That brings me to one FTSE 100 share that has an incredible record of raising its dividend annually, for over half a century. That makes it what we call a Dividend Aristocrat. Not only that, but I reckon the business has great potential both now and in the future.

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The firm in question is Spirax (LSE: SPX). Many people have not heard of this FTSE 100 member, perhaps because it is an industrial business that sells to other companies. But from a commercial perspective, I think there is a lot to like about the business model – and what it means for dividend potential.

Resilient demand, proven model

Over its long existence, Spirax has honed a business model that concentrates on some specific engineering needs customers may have. For example, although steam may seem like the technology of a bygone era, it currently has a wide variety of industrial applications.

By selling and servicing equipment that can help customers realise those applications and those of various industrial fluids, Spirax has found a very lucrative niche.

When a client’s machine stops working, business interruption costs can be substantial. That gives Spirax pricing power. It also means that demand can be strong even during an economic downturn.

I’d happily own this share

Things may not always go smoothly. For example, one risk I see is softness in demand in the Chinese market continuing – and perhaps spreading to other markets. That could hurt revenues and profits in coming years.

But I would be happy to own the share for the long term – if I could buy it at the right price.

Not yet a bargain

The Spirax share price has been falling. Indeed, the share now costs 36% less than it did at the beginning of the year. Over five years, the decline has been 22%.

Created with Highcharts 11.4.3Spirax Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But does that mean it is now good value? Not necessarily. Spirax is trading on a price-to-earnings ratio of 25. That still looks expensive to me. I do not feel it offers me a sufficient margin of safety as an investor, should Spirax‘s business performance be worse than I hope.

For that reason, I do not feel now is the time for me to buy the FTSE 100 share for my portfolio.

I continue to like the business model and the dividend prospects it provides. But the price to me is not attractive. So I will wait and watch, in the hope that at some point I may be able to buy Spirax shares at what I regard as an attractive valuation.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

C Ruane 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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