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I’d sell this sliding FTSE 100 dividend stock right now

The last time I covered European travel operator TUI Travel (LSE: TUI), I concluded that while the company’s near-term outlook might seem uncertain, over the longer term, the group’s size and experience means it’s well-placed to capitalise on consumers’ ever-growing demand for holidays and holiday packages.

However, while I still think that over the long term this business has a bright outlook, I reckon management is going to struggle to attract investors back to the stock as Tui’s near-term outlook has only deteriorated since I last covered the company. 

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Falling star

Analysts are now expecting the business’s earnings per share to fall by 28% for 2019, and this target could be revised lower if Tui’s fleet of Boeing 737 Max planes isn’t allowed back into the sky. 

Like so many other airlines and tour operators around the world, Tui has been forced to ground its Boeing 737 planes due to concerns over safety. Management expects the grounding to cost the company €200m this year if they’re allowed back in the sky by July. If not, the financial repercussions will be even more severe.

Granted, the enterprise can’t do much about the situation, and it’s not alone. However, from an investment perspective, the uncertainty makes the company uninvestable for the time being, in my opinion. Further profit warnings could force management to slash its dividend, and this will only lead to further share price declines. 

All in all, I think there are much better investments out there with less uncertain outlooks, such as distribution and outsourcing group Bunzl (LSE: BNZL).

Slow and steady 

Tourism can be a volatile business, but when it comes to distribution and outsourcing, sales are a lot more predictable. Over the past five years, Bunzl’s earnings per share have grown at a compound annual rate of 8.7% as sales have risen nearly 30%.

Bunzl’s strategy is simple. It supplies the essential materials for many sectors in the service industry without which companies could not operate. This includes items such as food packaging, cleaning and hygiene products and safety protection equipment.

Because it’s the largest company in the UK offering these services, Bunzl has a tremendous competitive advantage over the rest of the industry. These products are highly commoditised, which means customers only really care about cost and, as a result, profit margins are razor thin (for the past five years the group’s operating profit margin has not exceeded 5.6%).

Competitive advantage 

I don’t think Bunzl is likely to lose this competitive advantage anytime soon and should remain at the top of its game for many years to come.

With this being the case, I reckon it’s worth paying a premium for the shares even though earnings growth isn’t particularly exciting. Analysts believe earnings per share will expand 29% in 2019 and 3.6% in 2020. This growth doesn’t justify Bunzl’s current P/E of 19.1 but, in my opinion, its market-leading position and record of growth do. There’s also a dividend yield of 2.1% on offer for income investors.

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Rupert Hargreaves owns no share 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.