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I’d buy this FTSE 100 dividend stock before the market comes to its senses!

Ferguson (LSE: FERG) may have taken a pummelling in the final quarter of 2018, but I believe that this makes it one of the finest bargains on the FTSE 100 right now. And particularly so for dividend chasers.

Things had been going swimmingly for the plumbing and heating products supplier up until the start Q4, but its share price collapsed from the record highs punched at the end of September and it continues to struggle for momentum, down almost 25% from those aforementioned peaks.

It’s not a mystery as to why Ferguson has felt the heat from scared investors. Some 80% of the group’s sales are generated in the US, and the market is fretting over what impact a combination of rising Federal Reserve benchmark rates and the tough trade negotiations between Washington and Beijing’s lawmakers will have on the country’s economy.

I would argue, though, that Ferguson’s low forward P/E multiple of 12.3 times — comfortably inside the widely-regarded value territory of 15 times or below — factors in these problems.

Indeed, with Fed chair Jerome Powell’s tone around future rate rises becoming less hawkish in recent weeks, and patchy data from both the US and China stressing the urgent need for a breakthrough with trade talks, this low level could provide the base for a stock price recovery as 2019 progresses.

Terrific trading

Trade at Ferguson has remained extremely strong despite those less reassuring datasets from North America in recent months.

Just last month the plumbing powerhouse released yet another excellent market update, advising that group revenues rose 9% in the three months to October, to £5.55bn (also representing a 7% rise on an organic basis). This result drove pre-tax profit 10% higher year-on-year to £432m too.

Chief executive John Martin commented that “growth in the US was widespread across all geographic regions and major business units,” with US organic sales growth in the period sprinting almost 10% higher on an annualised basis.And he suggested that Ferguson could continue to make heady progress in the weeks and months ahead, noting that “since the end of the quarter, the US has continued to grow well and the current indications are that growth will continue in the months ahead.”

Great dividend growth

You might not know it from looking at the share price, but City brokers upgraded their earnings forecasts for Ferguson in the wake of December’s perky release. They now predict a 17% rise in the 12 months to July 2019, a result that would continue the company’s recent run of annual double-digit percentage rises.

And this leads to predictions of further meaty dividend growth as well. Ferguson turbocharged the full-year payout by around a fifth in fiscal 2018, to 189.3 US cents per share, and it’s predicted to extend it to 206 cents in the current period. This means an inflation-smashing 3.2% yield.

With organic sales booming, margins still growing, and its appetite for profits-boosting M&A showing no signs of abating, Ferguson has a hell of a lot going for it. I’m convinced it can bounce back from that recent share price weakness I mentioned above, and that it will continue to dole out exceptional earnings and dividend growth for many years to come.

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Royston Wild 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.