Companies that consistently increase their dividends are the holy grail for dividend investors. And yet with many former dividend champions freezing or even cutting their payouts in recent years, companies with immaculate long-term dividend growth track records are becoming harder and harder to find.
Having said that, here’s a look at three companies that have achieved the impressive feat of increasing their dividends every year for the last decade.
Compass Group (LSE: CPG) may not have the highest yield in the FTSE 100, but in terms of dividend growth track records, the company is a star. Indeed, the support services group has increased its payout every year over the last decade, raising it from 10p in FY2006 to 32p last year. That’s an incredible compound annual growth rate (CAGR) of 12.3% in that time, a dividend growth investor’s dream.
While the current yield of 2.1% is a little underwhelming, had you bought Compass shares a decade ago for 350p, you would now be enjoying a yield of over 9% on your purchase price, illustrating the power of dividend growth. You would also be sitting on a capital gain of around 340%, a far better performance than the FTSE 100 index in this time.
Compass’s dividend growth is expected to continue, with City analysts pencilling-in dividends of 34.9p and 37.4p over the next two years. However with the company trading on a lofty forward looking P/E ratio of 21.2, I’m convinced that better opportunities to buy the stock may lie ahead.
British American Tobacco
British American Tobacco (LSE: BATS) is another company that has been a genuine dividend winner for long-term shareholders.
The tobacco giant has also increased its payout every single year over the last decade, from 56p in FY2006 to £1.69 last year. Like Compass, the stock has been a cash cow for long-term holders, and an investor who purchased the shares 10 years ago at around the 1,600p mark, would now be enjoying an incredible dividend yield of 10.6% on top of the 240% share price gain.
The stock has enjoyed a formidable run over the last year, rising almost 30%, and as a result now trades on a forward looking P/E ratio of 18.8 with a trailing dividend yield of 3.1%. At those metrics, I’m not seeing a great deal of value, despite the company’s amazing dividend growth track record.
City of London Investment Trust
Lastly, for those seeking consecutive dividend increases, it’s hard to look past the City of London Investment Trust (LSE: CTY). This diversified trust of 116 stocks aims to provide long-term growth in income and capital, and places a strong emphasis on rewarding shareholders with a dividend.
The trust has a phenomenal dividend growth track record and has now managed to increase its dividend payout for over 50 consecutive years. The current yield is 3.8% and the dividend has been increased by a very respectable 3.9% per year over the last five years, easily beating inflation. For me, this trust is a core holding for investors, and I’ll be looking to add to my own personal holding in the trust when markets undergo their next correction.
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Edward Sheldon owns shares in City of London Investment Trust. 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.