The Motley Fool

Why I think analysts are excited about FTSE stock Britvic’s 2021 dividend prospects

Image source: Getty Images.

The FTSE 250 contains some decent, defensive, evergreen cash-generating companies, such as soft drinks supplier Britvic (LSE: BVIC). And, right now, City analysts are predicting an impressive resurgence in shareholder dividend payments for 2021 of around 20%.

Why I think Britvic is a great FTSE dividend payer

I reckon the stock is a good candidate for my long-term portfolio and a decent vehicle for compounding wealth. And that potential upthrust in the dividend next year is a bigger increase than those analysts are predicting for many other defensive companies I’m watching. For example, they expect Diageo’s dividend to rise by about 4.5% and Unilever’s by about 7%.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

In fairness though, Britvic was affected by the Covid-19 pandemic. Earnings plunged in the full trading year to September by around 37%, and the dividend slipped by about 21%. So, the anticipated increase in the shareholder payment will restore the dividend back near pre-Covid levels.

However, Britvic continued trading through the crisis, and the cash flowing into the business held up well. I think that’s one reason backing up analysts’ rosy expectations around shareholder dividend payments. Meanwhile, with the share price near 840p, it’s still more than 20% below its pre-Covid peak earlier in the year. But those same analysts reckon earnings will come roaring back in 2021 too. And they’ve pencilled in an increase close to 27%.

Based on those estimates for earnings and the dividend in the current trading year to September 2021, I think the forward-looking valuation looks fair. The earnings multiple runs near 15.5 and the dividend yield at about 3.4%. And I think the six-year record of cash-backed growth in earnings is worth me buying into. Indeed, after the pandemic has faded, I reckon the company has a good opportunity to continue its operational progress.

Strong operational progress

The signs are good because, in October, the company announced a new and exclusive PepsiCo bottling agreement. The 20-year franchise will continue a relationship between the two companies and provides Britvic with security and visibility ahead.  

Indeed, Britvic reckons it is “one of the leading branded soft drinks businesses in Europe.” And the business has been built around the company’s “leading” brands such Fruit Shoot, Robinsons, Tango, J2O, London Essence, Teisseire and MiWadi, along with PepsiCo brands such as Pepsi, 7UP and Lipton Ice Tea.

With Britvic, I view the recent weakness in earnings, the dividend and the share price as a temporary setback caused specifically by the pandemic. When that recedes, I expect operations to bounce back and continue their progress. The underlying business remains robust, cash flow is strong, and the long-term prospects for steady dividend growth are attractive.

So, I’d be happy to buy some of the shares today with the intention of holding onto them for the long-term. Indeed, 20 years from now, I may be glad I did!

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Britvic, Diageo, and Unilever. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.