Life’s not been good for Ibstock (LSE: IBST) or its shareholders (like myself) of late, the brickmaker’s share price having fallen a fifth in a little over four months.
Investors have been pulling their cash out amidst rising concerns of a no-deal Brexit in October, a scenario which many fear will smash the UK housing market. But that is only part of the recent bearishness — news of a sharp 17% pre-tax profits decline at Ibstock in the first half, one caused by higher tax and administrative costs and tough comparatives, did little to encourage the market either.
These issues aren’t enough to make me lose sleep, however. Put simply, there simply aren’t enough bricks to go around to meet homebuilding activity, and such is the size of the country’s homes shortage that this trend is likely to last for some time yet, Brexit or otherwise. No wonder, then, that the FTSE 250 firm felt assured enough to lift the interim dividend and pay a special dividend of 5p per share.
City analysts now expect a total dividend of 14.6p per share for 2019 in reflection of this extra reward, and this creates a giant yield of 7%. The future remains bright for Ibstock and I certainly won’t be selling my shares any time soon.
The FTSE 100 faller
Bunzl (LSE BNZL) certainly isn’t having the best of things right now, either. The FTSE 100 share is feeling the strain from tougher macroeconomic conditions and particularly so in North America, its key trading region. As a result, sales growth between January and April slowed to 2% from 12% in the same period last year, and consequently its share value has fallen more than 20% from the 2019 peaks punched in April.
The business might be prone to the occasional earnings blip, but such drops are few and far between, an indication of the immense protection afforded by its broad geographical footprint and its wide range of services and products which it provides to a multitude of industries and sectors. Indeed, the essential nature of many of its products means that even if macroeconomic conditions deteriorate, Bunzl can be confident that group sales will never, ever fall off a cliff.
A proven dividend hero
It’s these qualities that make the business one of the best ‘buy and forget’ shares on the Footsie right now. In fact, this exceptional earnings visibility has certainly made it a hit with income investors in recent decades, the company having lifted the annual dividend for 26 years on the spin.
Now, those current trading troubles mean that Bunzl is expected to endure a rare 1% earnings fall in 2019. But that robust longer-term profits outlook and rock-solid balance sheet give it the confidence and the financial might to likely keep pursuing earnings-boosting acquisitions and to continue lifting dividends as well.
City analysts certainly believe so too, and they’re predicting a 52.3p per share dividend for this year, up from 50.2p last time out and one which yields 2.6%. There are bigger yields to buy, sure, but that’s the beauty of Bunzl’s progressive dividends: they become truly mighty yields as the years roll by. This is why I bought the Footsie hero for my personal Stocks and Shares ISA, and it’s why I believe that you should too.
Royston Wild owns shares of Bunzl and 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.