Whitbread (LSE: WTB) is a share that has proved a dream ticket for those seeking exceptional dividend growth.
Helped by a record of robust earnings expansion, the Premier Inn and Costa Coffee operator has hiked dividends by almost 50% during the past five years alone. And with City analysts predicting this run of profits improvements to continue — rises of 3% and 7% are forecast for the years to February 2019 and 2020 respectively — shareholder payouts are unsurprisingly predicted to continue their northwards march too.
A 104.9p per share reward is anticipated for this year, up from 101p last year, and a 112.5p dividend for fiscal 2020.
Yields of 2.5% and 2.7% respectively may be chubby rather than spectacular. However, Whitbread’s growth, and thus dividend outlook, is much healthier than that of many FTSE 100 shares which carry larger yields. And so the leisure leviathan is worth serious attention today from income chasers.
Back in April the market reacted with mild indifference over Whitbread’s plan to separate its Costa Coffee unit from the rest of the business. In my opinion, share pickers are ignoring the brilliant benefits that the demerger brings.
Calls to split the group have been reverberating for some time now so that the long-term value of the company’s hotel and coffee shop divisions can be fully realised. Both businesses are embarking on massive expansion programmes across the globe and by dividing them up, Whitbread can ensure that each unit can focus 100% on their respective growth strategies.
The demerger is set to take up to 24 months to execute, and given the rate of progress across the business there is a lot for investors to already look forward to. Last year group revenues smashed through broker expectations, up 6.1% year-on-year to £3.3bn. And Whitbread also announced an increase in its cost-cutting target to £250m over the next two years from £150m previously.
At current prices, Whitbread can be picked up on a forward P/E ratio of 15.5 times. This is far too cheap in my opinion, given the company’s excellent earnings and dividend prospects in the near term and beyond.
In the box seat
Real estate investment trust (REIT) Tritax Big Box (LSE: BBOX) is another share in great shape to dole out handsome dividends.
Under REIT rules, the FTSE 250 firm is required to distribute a minimum of 90% of its profits to shareholders in the form of dividends. So broker projections of sustained earnings growth bodes extremely well for future payouts.
The bottom line is expected to swell 12% in 2018, and this gives rise to an estimated 6.7p per share dividend, up from 6.4p last year and yielding 4.5%. Moreover, boosted by an anticipated 5% profits rise in 2019, dividends are predicted to increase to 7p, nudging the yield to a delicious 4.7%.
As I commented last time out, Tritax Big Box is in great shape to ride the e-commerce boom as fast moving consumer goods and retail giants need so-called big box units to store and ship their wares. The move to online has much, much further to run, and so I believe the space provider is worthy of a premium forward P/E ratio of 19.7 times.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.