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A FTSE 100 dividend growth stock I’d buy with my last £1,000

Hargreaves Lansdown (LSE: HL) certainly isn’t having a great time of it right now. Half-year results in January revealed the impact that a blend of “geopolitical uncertainty, market volatility and weak investor confidence” was having on the FTSE 100 financial service provider’s business.

It generated just £2.5bn of net new business in the six months to December, it said, a severe deterioration from the £3.3bn it had generated during the corresponding 2017 period.

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As a result of these weaker business flows and negative stock market movements between July and December, total assets under administration slipped 6% from the start of the half to £85.9bn.

Last month’s results may not have sparked cause for wild celebrations but they did illustrate one of Hargreaves Lansdown’s key qualities. Namely, its ability to keep attracting new business irrespective of troubles across the broader market, paying testament to the positive impact of its broad and diversified range of financial products and strong brand name.

This is why City analysts are expecting the Footsie firm to continue growing earnings over the medium term, rises of 5% and 10% anticipated for the years to June 2019 and 2020, respectively.

Here to stay

Let’s make no bones about it. An environment of sustained low interests, and consequently pathetic yields offered by traditional savings products, has changed the investing landscape and Britons are becoming increasingly active in managing their savings to generate some decent returns.

With the number of financial products of varying complexity booming too, the need for sound financial advice is huge. This is why the number of clients on Hargreaves Lansdown’s books continued to climb in that troubled first fiscal half, up 45,000 from the start of the period to a total in excess of 1.3m by the end of 2018.

And this means Hargreaves Lansdown can be relied on to deliver strong and sustained profits growth many years into the future. As the company itself noted in that recent release: “The market opportunity… remains significant, extending across £1trn of addressable investment assets within the private wealth market and up to £2.4trn when cash savings are also included.”

A dividend growth darling

For this reason I would be happy to spend my last investment pennies to buy into the Footsie firm. It may command a premium rating (a forward P/E ratio of 32.6 times, to be exact) though, in my opinion, a handsome price is well deserved given its enormous long-term growth possibilities, and particularly so when markets improve.

What’s more, a bright profits outlook means that Hargreaves Lansdown should remain a great dividend grower for years to come too. Slowing business flows aren’t expected to put paid to its progressive dividend policy and a 41.2p per share reward is anticipated for this year. And a return to big dividend growth is anticipated from fiscal 2020, a 45.4p payout currently anticipated.

Investors can find bigger medium-term yields than Hargreaves Lansdown’s ones of 2.4% and 2.7% for this year and next. Though if you’re looking for a blue-chip share that has what it takes to grow dividends long into the future I believe this stock is one of the best out there. 

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.