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2 growth dividend giants I’d buy with £2,000 today

For those seeking strong dividend growth now and in the future, it is difficult to look past Marshalls (LSE: MSLH), in my opinion.

The business, which manufactures paving as well as an assortment of other landscaping products, reported on Wednesday that revenues crept 8% higher in 2017 to £430.2m, or 6% on a like-for-like basis (excluding the contribution of water management specialist CPM). This result pushed pre-tax profit to £52.1m, up 13% year-on-year.

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And to the pleasure of income seekers Marshalls elected to give its progressive dividend policy a further dose of rocket fuel, hiking the full-year ordinary payout to 10.2p per share from 8.7p a year earlier.

On top of this, the FTSE 250 firm also paid a 4p per share supplementary dividend, up from 3p in 2016.

Commenting on the results, chief executive Martyn Coffey said: “Good progress has been made in the year executing the 2020 Strategy, notably the acquisition of CPM, and the ongoing self help programme to drive organic growth is progressing wellThe underlying drivers have remained positive in our main end markets and our sales and order intake have been strong in the first 2 months of 2018.

Looking good

Marshalls has a strong record of grinding out earnings rises year after year, and while there is clearly some danger to future expansion as Brexit-related concerns look set to persist, its ability to continue outperforming the market should allow it to keep growing in the medium term at least.

Besides, the West Yorkshire firm’s strong position in the expanding transport infrastructure and housebuilding segments provides earnings with a little more protection.

City analysts are expecting profits to rise 12% in 2018 and by an additional 7% next year, prompting expectations of further dividend growth too.

An ordinary dividend of 12.3p per share is forecast for this year and 13.1p for 2019, resulting in chunky yields of 2.7% and 2.9% respectively. And I wouldn’t rule out extra special dividends being shelled out either under Marshalls’s so-called 2020 Strategy.

It may be expensive, the business sporting a forward P/E ratio of 18.9 times. But in my opinion its super track record merits such a premium, as does the brilliant revenues potential created by the vast investment it is making in acquisitions as well as product development.

Reassuringly expensive

Domino’s Pizza (LSE: DOM) is another share whose brilliant growth and dividend prospects deserve serious attention.

In 2018 City analysts are expecting the takeaway giant to see just a 1% earnings rise, down from the double-digit percentage rises of recent years as consumer spending power dips. But Domino’s is expected to pick up the pace again from next year for which a 9% advance is predicted, underpinned by the company’s ambitious expansion programme.

What the FTSE 250 firm lacks in near-term growth appeal it makes up for in terms of dividends, however. Last year’s 9p per share payment is expected to rise to 9.7p in the current period and again to 10.4p in 2018. Consequently investors can gobble up handy yields of 2.9% and 3.2% for this year and next, respectively.

Domino’s trades on a forward earnings multiple of 20.3 times, but its robust position in the takeaway market makes it worthy of an expensive rating in my opinion.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino's Pizza. 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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