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A FTSE 100 dividend stock I think could help you retire in luxury

In a recent article I discussed Ibstock and explained why, given its robust record of lifting dividends and sunny profits picture, I reckon it’ll make me a fortune by the time I retire. In fact, I’m thinking of loading up on some more of the company’s stock in the wake of my fresh analysis.

It’s not the only top income grower that I’ve got my eye on, though. Ferguson (LSE: FERG) is one from the FTSE 100 I reckon could make investors delicious returns in the years ahead. Why? The terrific progress it’s making in its core US territory, even during difficult trading conditions.

According to fresh quarterlies, Ferguson — which provides plumbing and heating products around the globe — still delivered a 2.7% improvement in group organic revenues despite the impact of a slowing Stateside economy.

Riding out the storm

There’s no doubt the business is suffering from tougher conditions in the US, a territory from where is sources around 85% of total revenues. The Footsie firm commented that “overall market environment has moderated to low growth” and this was reflected in organic sales growth in the region slipping to 3.3% between January and April. This was quite the departure from growth of almost 10% in the prior six months.

Things are not ideal, clearly, though I’d argue its ability to generate any sort of sales growth in quarter three, given the toughness of market conditions in recent times and the immense comparatives of a year earlier, is something that’s to be commended.

Indeed, the business saw trading profit in the States rise 3.6% in the last quarter, and 2.5% at group level, to £359m. Ferguson’s able to stay afloat by grabbing market share from its rivals, and the margin boost which rampant cost-cutting is delivering (group gross margins rose to 29.5% as of April, from 29.3% three months earlier).

I’m sure that many of you remain unconvinced, however. This is why I’d like to highlight recent evidence which shows a rapid improvement in Ferguson’s market conditions. According to the Commerce Department, new home sales in the US rebounded 7% year-on-year, on a seasonally-adjusted basis, to 646,000 units in June. Too early to claim the market has bottomed, sure, but a robust jobs market and the prospect of low interest rates getting still-lower gives hope of ever-improving conditions for the company as we move into 2020.

Dividends heating up

Truth be told, even given its current troubles, Ferguson remains in great shape to keep its ultra-progressive dividend policy in business. Net debt to EBITDA remains at just 0.9 times, well below the company’s targeted limit of 2 times. And this gives it plenty of headroom to keep rewarding its shareholders generously.

This is why City analysts expect the plumbing giant, which hiked the full-year dividend 21% for the fiscal year ending July 2018 to 189.3 US cents per share, to lift it to 207.8 cents in the year that’s about to expire, and again to 223.2 cents in fiscal 2020. The company’s decision to launch a $500m share buyback programme last month has certainly done broker hopes of increasingly-large dividends no harm.

Trading might be tricky right now, though I reckon Ferguson should still deliver handsome returns to its shareholders for many years to come, given its rising might in the world’s biggest economy. I’d happily buy it today to boost my pension pot.

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Royston Wild owns shares of Ibstock. The Motley Fool UK has recommended Ibstock. 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.