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Are these 2 FTSE 100 dividend growth stocks more exciting than they look?

Once again, we see a huge mis-match between how a company presents its results and how the market views them.

Cleaning up

FTSE 100 global science and chemicals company Johnson Matthey (LSE: JMAT) prefaced today’s preliminaries for the year to 31 March with CEO Robert MacLeod hailing “another good year with strong sales and operating profit growth.” But markets failed to share his enthusiasm, with the share price down more than 5% at the time of writing.

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You ungrateful lot. What do you want? As ever, it comes down to expectations. JMAT posted a 5% rise in revenues to £10.75bn, coupled with a whopping 53% rise in profit before tax to £488m. Earnings per share rose 39% to 215.2p, while the dividend was hiked 7% to 85.5p.

Steady as she goes

I suspect investors were underwhelmed by growth forecasts, which look modest in 2019/20 and weighted to the first half. McLeod expects 2019/20 operating performance growth to be within its “medium term guidance of mid to high single digit growth”. Or maybe investors are struggling to get worked up given that the Johnson Matthey share price has gone nowhere fast since 2014.

Today, the business posted a small dip in return on invested capital (ROIC), from 17% to 16.4%, mainly due to higher precious metal working capital. However, its balance sheet looks strong with net debt of £866m, giving net debt to EBITDA of 1.3 times.

Electric outlook

Johnson Matthey specialises in sustainable technologies and its clean air division, whose catalytic converters appear in a third of the world’s cars, has been boosted by tighter regulation in Europe and China. It should also benefit from the expanding market for electric vehicles.

However, new tech can be a double-edged sword, as rising electric car sales could boost demand for its higher energy density battery materials while simultaneously hitting catalytic converter sales.

The £5.8bn group trades at just 12.1 times forward earnings. Its forecast yield is just 2.8%, but we have seen today that management policy is progressive, and cover healthy at 2.7. The dividend hasn’t been cut for 26 years and my fellow contributor Roland Head says this is a stock he would buy and hold forever.

Finding its way

Compass Group (LSE: CPG) is another FTSE 100 stock that’s easy to overlook, even though its share price has grown 76% over the last five years against just 12% across the index as a whole.

The food, hospitality and support services recently posted a 6.6% rise in underlying revenues to £12.5bn. Operating profits were squeezed by increased cost pressures in Europe, but still climbed 5.8% to £951m.

Nicholas Hyett at Hargreaves Lansdown recently described Compass as a “brilliantly boring business,” while our very own Peter Stephens says it offers resilience and dependable income growth, and anticipates impressive long-term total returns.

Compass has a hefty market-cap of £28.5bn. But, unfortunately, it isn’t cheap at the moment, trading at 21 times forecast earnings. Some might see that as reassuringly expensive.

The yield is also low at just 2% with cover of 2.1 although, again, management is generous and as it has hiked it every year since 2001. Earlier this month, it lifted the interim dividend 6.5% to 13.1p per share. Perhaps it’s a little too boring though.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. 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.