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Why I’d buy shares in this consistent FTSE 100 dividend grower today

I’ve been keen on FTSE 100 company Relx (LSE: REL) for some time. The global provider of information-based analytics and decision tools has an impressive record of incremental annual increases in revenue, operating cash flow and earnings. Collectively, they’ve driven an almost 70% increase in the dividend payment over the past five years.

If you’d been holding the shares, that increase in your income from the firm would have been nice enough. But, on top of that, the share price has lifted by almost 100% over the period, so your original capital investment would have doubled in value too.

Quality and consistency

The financial quality indicators wouldn’t keep me awake at night either. The company’s return-on-invested-capital figure runs at close to 13.2% and the operating margin at just above 26%. When I look at Relx, I reckon I’m seeing a quality enterprise flourishing within its niche in the market.

And I find today’s full-year report encouraging. Underlying revenue rose 4% compared to a year ago and adjusted earnings per share at constant currency rates moved 6% higher. The directors expressed their confidence in the outlook by pushing up the full-year dividend by 7%, which continues that long record of dividend-raising.

The firm abandoned its complicated Anglo-Dutch dual-listed structure during 2018 and now operates with a single parent company listed in London, Amsterdam and New York. I think simplification in business is almost always a good thing, and the firm’s chairman, Sir Anthony Habgood, said in the report the move increases transparency for shareholders.

Organic and acquisitive growth

The firm had a busy year for acquisitions and added nine businesses to its operations in the areas of content, data analytics and exhibition assets for an investment of £978m. But it also disposed of eight assets raising £45m. Such nipping and tucking strikes me as a good thing because it demonstrates the directors are aiming to keep the firm’s operations focused on the best and most profitable areas of the market.

Chief executive Erik Engstrom pointed out in the narrative that despite the acquisition programme, the number one strategic priority” is to organically develop “increasingly sophisticated” information-based analytics and decision tools that deliver enhanced value to customers. I reckon that strategy keeps the firm ahead of developments in the market and keeps those steady and increasing cash flows rolling in.

Looking forward, the directors are confident the company will achieve growth in underlying revenue, adjusted operating profit and adjusted earnings per share during 2019. More of what we’ve become used to, then.

Meanwhile, at the recent share price around 1,731p, the forward-looking price-to-earnings ratio runs at 19 for 2019 and the anticipated dividend yield is just over 2.6%. City analysts following the firm expect earnings to cover the payment twice. I think the valuation looks fair, but the share-price chart shows a period of consolidation. I also think it’s as good a time now as ever for me to hop aboard by buying some of the shares.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended RELX. 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.