Investing in companies that consistently lift their dividends (dividend growth investing or DGI) can be a rewarding investment strategy. Not only do you receive an increased cash payout when a company lifts its dividend, but you also often enjoy share price appreciation over time, as a rising dividend tends to place upwards pressure on a company’s share price.
With that in mind, today I’d like to highlight three FTSE 100 companies that recently announced dividend increases.
Let’s start with packaging firm Mondi (LSE: MNDI) – a company that I believe offers considerable investment appeal when you consider the huge growth in online shopping in recent years and the subsequent increase in demand for cardboard packaging.
Recent full-year results here were excellent, with basic underlying earnings per share climbing 27%, and this strong performance resulted in the company announcing a dividend increase of an impressive 23%. That’s a fantastic result for shareholders and marks nine consecutive dividend increases for the group, with the payout rising 700% over the last nine years.
Is Mondi a good dividend stock to own? In my view, yes it is. Its yield is almost 4%, dividend coverage is strong, and the stock’s valuation is very reasonable (forward P/E of 11). I continue to rate the stock as a ‘buy’ despite concerns that global growth could moderate this year.
St. James’s Place
I was also impressed with the recent St. James’s Place (LSE: STJ) full-year results. The FTSE 100 wealth manager reported solid growth and announced a 12.5% increase in its full-year dividend in late February, despite the well-documented global equity market sell-off late last year. That’s a great result in challenging market conditions.
To my mind, St. James’s Place might just be one of the FTSE 100’s best-kept DGI secrets. An analysis of the group’s dividend growth track record reveals that it has now notched up 15 consecutive dividend increases (and never cut its payout) and that over the last 10 years it has lifted its payout by an incredible 995%.
STJ shares experienced a significant pullback in the second half of 2018, and while they have rebounded this year to a degree, I continue to see appeal at current levels, as the prospective yield for FY2019 is a high 5.1%. The group looks well placed to help retiring baby boomers with their financial planning needs in the years ahead in my opinion.
Lastly, financial services group Prudential (LSE: PRU) has also announced a dividend hike, increasing its payout by 5% to 49.35p per share yesterday. The group also reported an above-forecast 6% increase in operating profit for the year and a 26% increase in diluted earnings per share.
Prudential is another stock with an impressive dividend growth track record, having now notched up 14 consecutive dividend increases. And I think the company should be able to continue increasing its payout going forward. Not only is the group well positioned for growth due to its exposure to Asia, but the company’s dividend coverage is high (a ratio of nearly 2.4 for FY2018), which suggests the group has the capacity to increase its dividend even if earnings stall.
Currently trading on a forward P/E of 10.6 and sporting a prospective yield of 3.3%, I believe Prudential shares offer appeal at present.
Edward Sheldon owns shares in Mondi, St. James's Place and Prudential. The Motley Fool UK has recommended Prudential. 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.