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I think this FTSE 100 dividend growth stock is too cheap for ISA investors to miss!

If you’re on the lookout for dividend growth stocks to add to your ISA portfolio, then I highly recommend taking a closer look at the world’s largest cruise ship operator Carnival (LSE: CCL).

Underperforming

Over the past 12 months, shares in Carnival have underperformed the wider market by around 30% excluding dividends. The stock has struggled because the firm has failed to meet expectations.

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Heading into 2019, analysts had been expecting the company to report earnings per share for the year of $4.80, up around 9% year-on-year, based on management’s projections.

However, as the year’s progressed, Carnival has struggled to meet this target. Adverse weather conditions, higher-than-expected fuel costs, and the re-introduction of the US travel embargo against Cuba, have all weighed on growth.

After taking all of these factors into account, management is now forecasting little-to-no earnings growth this year.

Look to the long term

A lack of growth for 2019 is disappointing but, from a long-term perspective, I think this could be an excellent opportunity for investors to snap up a high-quality business at a discount price.

After recent declines, shares in Carnival are currently changing hands at a forward P/E of just 9.7, substantially below its five-year average of 15. On top of this, the stock’s dividend yield has surged to 4.8%. The company is also repurchasing its shares. The payout is covered 2.1 times by earnings per share.

And I’m incredibly optimistic about that long-term potential for the business. You see, while the cruise industry has experienced explosive growth over the past decade, it still accounts for less than 10% of the global travel and tourism market. This leaves plenty of room for growth in the years ahead.

Analysts expect the industry to continue to expand at a steady rate for the foreseeable future and Carnival, as the world’s largest cruise ship operator, is well-positioned to profit from this growth.

Having said that, as we have seen over the past 12 months, Carnival’s growth won’t come in a straight line. Things like fuel costs and weather are unpredictable, so the company has to work around these. Nevertheless, over the long term, Carnival’s earnings should only trend higher as the cruise industry continues to boom.

Over the past six years, earnings per share have grown at a compound annual rate of around 26%, and the dividend to shareholders has increased at an annual rate of 14%. New ships and higher prices should enable the company to return to growth in the years ahead.

The bottom line

So overall, while Carnival might have sailed into stormy waters in 2019, I think the company’s long-term outlook is exciting. For that reason, I believe now could be an excellent time for ISA investors to snap up shares in this undervalued blue-chip dividend champion before the rest of the market catches on to the opportunity.

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Rupert Hargreaves owns shares in Carnival. The Motley Fool UK has recommended Carnival. 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.