FTSE 100 insurer Legal & General (LSE: LGEN) and FTSE 250 drinks group Britvic (LSE: BVIC) have records of robust annual dividend growth. Both are forecast to continue delivering it in the coming years.
At their current share prices, they’re trading on reasonable earnings multiples and offer investors good starting yields, as well as having increasing payouts on the cards. I’d be happy to buy a slice of both companies. Here’s what investors can hopefully look forward to.
Britvic hasn’t looked back since resisting a reverse takeover by Irn-Bru maker AG Barr half a decade ago. Earnings per share (EPS) for its last financial year (to 10 October 2017) came in at 52.9p, which is over 50% higher than the 35.2p it posted for 2013. This growth has supported a 44% increase in the dividend to 26.5p from 18.4p over the same period.
In today’s Q1 trading statement, Simon Litherland — chief executive since 2013 — reported “a solid start to the new financial year.” Despite, general volume weakness, group revenue was 3.3% ahead of a strong Q1 in the prior year. This was due to 22.6% growth in Brazil, which benefitted from last year’s acquisition of concentrates and juice business Bela Ischia, 16.5% growth in Ireland, boosted by the acquisition of drinks wholesaler East Coast, as well as the continued success of Pepsi MAX.
Britvic reiterated that the introduction of a sugar tax in the UK and Ireland brings a level of uncertainty, but said: “We are well placed to navigate this given the strength and breadth of our brand portfolio and exciting marketing and innovation plans.” With the company also being in the final phase of transforming its supply chain and set to reap the rewards of significant cost and commercial benefits, analysts’ growth forecasts look reasonable to me.
The shares are trading down almost 7% at 730p as I’m writing, with the market perhaps disappointed by Q1’s volume performance. However, with a dividend of 27.2p expected this year, giving a yield of 3.7%, and forecast payout increases of 5% and 7% for fiscal 2019 and 2020, I continue to see Britvic as an attractive and defensive proposition.
Legal & General hasn’t got the defensive characteristics of Britvic, so the general state of the economy is always liable to have more of an influence on the performance of its business. However, it was less badly hit by the financial crisis than many companies in the financial sector and its earnings and dividend recovery were relatively swift and strong.
The company, which has been nominated by my Foolish friend Edward Sheldon as his top stock for 2018, said in a trading update in December that it “continues to see great momentum in all its businesses” and was on track for a record year. Forecast EPS of 25.7p would be 69% higher than the 15.2p it posted for 2013, while a forecast 15.3p dividend would clock in 65% higher than 2013’s 9.3p.
At a share price of 270p, the 15.3p dividend gives a yield of 5.7%. And with this juicy payout forecast to increase 6% a year over the next couple of years, Legal & General looks another attractive dividend-growth stock to me.
G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended AG Barr. 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.