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Forget BT! I’d go for this stock’s growing 4.5% dividend yield instead

BT has shifted into dividend-cutting-mode. Rather than taking a chance on the troubled company, I’d rather invest in a firm with stable operations and a growing dividend.

And I’m keen on Wilmington (LSE: WIL) because of its multi-year record of raising its dividend. Right now, with the share price close to 208p, the anticipated dividend yield for the current trading year to June 2020 sits at around 4.5%.

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Dividend growth on the cards

But as well as a fat pay-out, it’s reasonable to expect the dividend to grow in the years to come. City analysts have pencilled in 3-4% increases for the next couple of years. And over the past five years, the dividend has increased by around 25%.

The firm earns its living providing information, education and networking services in the areas of risk & compliance, healthcare and professional knowledge. And today’s full-year results report reveals the company has been trading steadily.

Revenue rose 1% compared to last year. And although adjusted earnings per share fell by almost 12%, the firm delivered a decent cash performance and managed to reduce net debt by just over 14%, to just under £34m. The directors kept up the long-running policy of progressing the dividend by pushing up the total payment for the year by 3%.

Non-executive chairman Martin Morgan explained in the report that Wilmington made progress by focusing on organic growth, despite “the current uncertainties in the political and economic climate.” My guess is that when Brexit is behind us, Wilmington’s customers could increase their investment in operations, leading to stronger trading and growth for the firm in the years ahead.

There was 6% organic growth in the Risk & Compliance division, which was driven by “double-digit” growth in the “main” compliance business. Indeed, the firm experienced “strong” demand for its online courses and bespoke in-house programmes. And, during the period, the company invested in a new platform for Compliance Week, its news, analysis and information resource for the ethics, governance, risk, and compliance professions. 

Steady trading and growth potential

Now, I admit this isn’t the most exciting business in the world and your eyes may be glazing over around now. But sometimes dull businesses can deliver consistent returns and that’s what I’m expecting from Wilmington. One thing I like is the firm’s diversified operations. It also, for example, put money into developing new courses for wealth management in the period.

The Healthcare division “recovered from a challenging prior year” to deliver a 1% uplift in organic revenue growth. And the Professional division produced a 2% decline in organic revenue because of the “UK economic/political climate.”

I see an enterprise that’s holding its own in a depressed trading environment but with a pocket of fast growth. To me, Wilmington is just the type of stock to buy before Brexit happens in the hope that conditions will improve later, allowing operations to flourish.

Meanwhile, the valuation strikes me as undemanding with a fat dividend yield and the forward-looking earnings multiple for the trading year to June 2020 sitting close to 11.

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Kevin Godbold has no position in any 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.

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