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Another brilliant dividend growth stock I’d buy for my ISA for March

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In a recent article I explained why investor interest in Ibstock might be about to take off. But it’s not the only dividend giant whose share price could explode in March.

4Imprint Group (LSE: FOUR) might not offer the same sort of yield as the brick-maker. Its 2.5% reading for 2020 leaves it looking short compared to the UK’s mid-caps where the average yield sits at 3%. I would argue though, that the rate at which it’s hiking dividends makes it a great buy for income chasers.

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Marketing mammoth

The business manufactures marketing and promotional items like pens, T-shirts, key-rings and anything else that can be emblazoned with a company logo. And it’s a market in which it is thriving. Revenues soared 17% in 2019, it said last month, a result that it added would help underlying pre-tax profits hit “the  upper end of the current market forecast range.”

The size of 4Imprint’s market is huge and it has plans to generate $1bn worth of annual revenues by 2022. It is a major player in the US and Canadian markets, territories from which it generates well over 90% of sales. And more recently it has been investing heavily to raise awareness of its brand, a strategy that’s got off to a blinding start in helping to shift volumes.

Profits to keep surging?

The FTSE 250 firm has been growing annual earnings by double-digit percentages for years now. Doling out your own-branded hats, mugs and the like is one of those well-established ways to get your name out there. And a strong US economy has kept demand for 4Imprint goods booming.

So what can we expect for 2020? Well it looks like the Stateside economy is tipped to grow at a lower rate in 2020 from recent levels, according to many economists. It reflects expectations of a broader slowdown globally and, more recently, the financial impact of the current coronavirus outbreak.

But City analysts believe that 4Imprint will continue to make great progress on the profits front. Current forecasts are suggestive of a 13% bottom-line rise in 2020. This might be down from the anticipated 17% rise for last year, but clearly is nothing to be sniffed at.

Delicious dividend growth

Such bright projections are married with hopes that ordinary dividends will keep spiralling higher too. 4Imprint raised the annual payout by 25% in 2018, for example, to 53.15p per share.

The number crunchers are expecting it to raise the payout to a 61.5p per share incentive for last year when preliminaries are released on March 3. And they have earmarked a 79.9p dividend for the current year.

But a juiced-up ordinary dividend is not the only thing investors should be looking forward to. For 2018, 4Imprint also forked out a special payment of 43.17p per share. A bright profits outlook and some exceptional cash generation leads me to believe that more supplementary dividends could be in the offing as well (net cash jumped to $41m in 2019 versus $27.5m a year earlier).

This is a stock that doesn’t come cheap. A forward price-to-earnings (P/E) ratio of 24 times sits above the widely-regarded value benchmark of 15 times. I believe that 4Imprint’s impressive top-line momentum makes it worthy of such a premium, though. And combined with the probability of more chunky dividend growth, I reckon it’s a top buy today.

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Royston Wild owns shares of Ibstock. The Motley Fool UK has recommended 4IMPRINT GROUP PLC ORD 38 6/13P and 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.

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