So here are three other stocks to consider with far higher growth forecasts. And not only that – they each pay a meaty dividend to boot!

ICG

ICG‘s (LSE: ICG) a specialist lender and asset manager, helping big investors put money into private credit and infrastructure deals. That means it earns steady fees, plus extra income when investments do well. With a near-5% yield backed by growing profits and assets under management, it looks appealing for both income and capital growth.

The best part? It boasts a huge (31-year-long) track record of uninterrupted dividend payments.

A key growth driver is that pension funds and insurers are still shifting money from bonds into private credit, which suits ICG’s operations. On the flip side, a nasty recession or credit crunch could hit deal-making and increase defaults, putting pressure on earnings and dividends.

Still, for patient investors comfortable with potential market volatility, I think it’s worth a serious look.

Barratt Redrow

Barratt Redrow‘s (LSE: BTRW) a housebuilding giant formed from the Barratt Developments and Redrow amalgamation, giving it huge coverage across the UK. It has an attractive 4.5% yield and stands to benefit if mortgage rates keep easing and buyer confidence continues to recover.

The long-term demand for family homes coupled with government pressure to increase housing supply supports the growth narrative.

Still, property’s a cyclical business. If the UK slips back into a downturn, sales and profits (along with dividends) could suffer. Build-cost inflation, planning delays, and any change to housing policy are extra headaches.

For investors ready to hold through a cycle with a fews ups and downs, it could be an opportunity to harness a gradual housing recovery with income on top.

DCC

DCC‘s (LSE: DCC) a diversified distributor, mainly in energy (like LPG and fuel), but also healthcare and technology products. Think of it as the middleman keeping lots of everyday services running, which helps smooth profits over time.

Like ICG, it boasts a 31-year payment history, with many years of steady increases and a 4% yield that’s well-covered by cash flow. There’s moderate growth potential from acquisitions and the shift into cleaner energy solutions, such as renewables-linked services.

On the risk front, demand for traditional fuels will slowly fall as the world decarbonises, so management has to keep up with innovative new business ideas. If you like dependable, boring-in-a-good-way companies and can live with some acquisition risk, DCC looks a sensible candidate to consider for a long-term UK income portfolio.

Looking beyond headlines

ICG, Barrett Redrow and DCC are three lesser-known FTSE 100 stocks that seldom make headlines. But they’re just the kind of dull companies that can quietly compound inside a retirement-focused ISA.

Spectacular comeback stories like Rolls-Royce might dominate headlines for short periods, but in the long-run, the tortoise here wins the race. For investors with a 20-30-year outlook, reliable (and reinvested) dividends can make all the difference.

The post 3 dividend gems tipped to outpace Rolls-Royce on the UK stock market in 2026 appeared first on The Motley Fool UK.

Only a dozen FTSE 100 companies have increased their dividends for at least 25 consecutive years, and sometimes longer. It’s a hugely impressive achievement, as it means generating the cash to fund shareholder payouts through thick and thin, decade after decade. These three really jumped out at me.

Halma is an income hero

Halma (LSE: HLMA) is the first. Many investors wouldn’t even spot it as a dividend stock because the trailing yield is only 0.65%. That low yield hides its real strength. The share price is up an incredible 33% over the last year and 70% across two years, suppressing the headline yield.

The Halma share price is still climbing, despite today’s choppy markets. First-half results published on 20 November showed revenues up 15.2% to £1.23bn and margins widening by 210 basis points. The board also lifted the interim payout by 7% to 9.63p. It’s increased dividends for 45 straight years, compounding at 6.9% over the last 15.

Nothing is risk-free. Halma earns large sums overseas, so currency movements can affect results. The price-to-earnings ratio now stands at 37.6, well above the FTSE 100 average of around 18. So it’s not cheap. Investors might still consider buying on a stock market dip, assuming Halma dips too. It may not.

DCC rewards shareholders

Marketing and support services group DCC (LSE: DCC) has lifted its dividend for 31 consecutive years. It’s in the middle of a major strategic shift as CEO Donal Murphy works to turn it into a global leader in energy distribution, but this could be an opportunity for long-term investors.

DCC shares have disappointed lately, falling 13% in a year, yet the valuation looks appealing as a result with a P/E of just 12. The trailing yield sits at 4.22%, and the dividend has grown at an average annual rate of 8.97% across the last decade.

On 17 November, DCC said it would return up to £600m to shareholders via a tender offer funded by the £1bn sale of its healthcare arm. There are risks in any transition, but for long-term investors, this could be a moment to take another look.

Sage Group looks strong

My third long-term dividend superstar is Sage Group (LSE: SGE). The software provider’s shares are up 80% over five years but have slipped 16% in the last 12 months. I’ve watched this one for a while. The valuation was always too high for me at roughly 33 times earnings, but today it’s nearer 26 times. Still pricey, but better value than before. Sage has earned its premium price.

It has increased dividends every year for a spell-binding 37 years. So don’t be fooled by that modest trailing yield of just 2%. Over the last 15 years, payouts have compounded at 7.11% a year. Risks include a slowing global economy and the threat that AI could undercut some of its services.

Nothing lasts forever, but these three companies show how determined, well-managed businesses can reward investors, with share price growth and dividend increases running back decades. Fingers crossed it continues. And there are plenty of other great FTSE 100 dividend stocks on the index too.

The post These 3 jaw-dropping FTSE 100 dividend stocks have 1 brilliant thing in common appeared first on The Motley Fool UK.

Here are three mistakes to avoid when picking dividend shares for passive income.

1. Chasing the highest yields

It’s tempting to pick the shares with the highest dividend yields, but ultra-high numbers often signal hidden trouble. A yield above ~10% frequently reflects a share price that’s fallen sharply because business is weak or risk is high. Struggling companies often can’t sustain such payouts, which may lead to cut dividends and poor total returns.

A better approach tends to emphasise sustainable yields, ones in the 5%-8% range, backed by solid cash flow and reliable dividend coverage.

Consider DCC (LSE: DCC), a FTSE 100 company specialising in energy sales, marketing and support services. Its yield’s around 4.3%, well below those risky high-yield names. But its income looks durable: free cash flow remains strong and dividend coverage has been consistent.

These qualities make it less flashy but perhaps more dependable than chasing big yields alone.

2. Ignoring payout ratios and cash flow

A company’s payout ratio measures how much of its earnings are paid out as dividends – but an investor should also check how much cash the firm has and how much free cash flow it generates. If dividends exceed what the business can generate in cash, risk increases.

Looking again at DCC, revenue dropped 4.5% in its full year ended March due to lower energy commodity prices. But its operating profit in the Energy division rose 8.5% on a constant currency basis.

Free cash flow conversion is very high at 84% and the company proposed a 5% dividend increase. This suggests DCC’s dividends are well supported. That said, its Technology division saw a drop in profit, which could drag on group cash generation if not addressed.

3. Overlooking long-term stability and growth

Stable dividend growth over many years compounds nicely. Companies that raise payouts steadily tend to reward patient investors more than those at risk of erratic payments. When choosing dividend shares, look for firms with long records of increasing dividends, manageable debt and predictable sectors.

DCC has a strong record: 31 consecutive years of dividend growth, with a compound annual growth rate of 12.9%. That’s rare and demonstrates a commitment to shareholder returns.

However, even with DCC there are risks. Revenue declined in some segments, there’s pressure in Technology, and there’s exposure to energy commodity price swings. If it fails to offset these negatives, growth in dividends or profit may stall.

Think sustainable and consistent

Dividend shares can deliver reliable income but not all are created equal. The best income stocks are those that combine sustainable payout ratios, strong cash flow and consistent growth.

DCC stands out among FTSE 100 income names. It has strong financials in its Energy division, good cash flow, and a long history of dividend increases. It’s a stock investors may consider for income, provided they keep an eye on profit trends, cost pressures and how well the weaker divisions recover.

In the end, building a strong passive income portfolio’s about avoiding traps as much as it is about finding winners – and DCC illustrates both sides of that coin.

The post Dividend shares can be great for passive income. But be careful to avoid these 3 mistakes… appeared first on The Motley Fool UK.

I’ve typically shunned income stocks with low yields, even those with a long track record of rewarding shareholders with annual dividend increases, like these two FTSE 100 dividend superstars. Now I’m having a rethink.

Halma keeps hiking payouts

First up is global health and safety technology specialist Halma (LSE: HLMA). It has a modest trailing yield of just 0.69%, but it’s a real champion for dividend growth.

The company has lifted its annual payout for an astonishing 45 years in a row. Over the last five years, it’s hiked dividends at an average rate almost 7% a year. The Halma share price has done well too, up 31% over 12 months and 60% over two. Calculations from AJ Bell show Halma has delivered a stunning total return of 352% over the last decade, with dividends reinvested. That’s the miracle of compound returns.

Of course, that doesn’t guarantee a repeat performance. The stock looks seriously pricey with a price-to-earnings (P/E) ratio of 35.9. As an international company, Halma is exposed to currency swings and tariffs. Yet for patient investors focused on long-term growth, its track record makes it well worth considering. There’s every chance those dividends will keep rolling in, but its share price could slow after such a strong run.

DCC looks better value

At the other end of the spectrum sits sales, marketing and support services group DCC (LSE: DCC). It has in-built diversification across the energy, healthcare, technology and retail sectors, but that’s about to change.

It’s in the middle of a major transformation as CEO Donal Murphy hones its focus purely on energy, where he hopes DCC can become a global leader in distribution. The healthcare division is being sold for over £1bn, with £800m earmarked for shareholders, starting with a £100m share buyback.

DCC has increased its dividend for an eye-popping 31 consecutive years. Latest results for the year to 31 March showed a 5% increase to 206.4p, giving a 4.4% yield, above the FTSE 100 average of around 3.25%. Free cash flow reached £588.8m, with 84% conversion, suggesting payouts are sustainable.

DCC shares look a lot cheaper than Halma’s, with a P/E of just under 12. However, that’s a result of recent poor performance, with the stock down 8% in the last year and 25% over five years. So this is a value stock, rather than a momentum play.

The company’s dividend has compounded at 10.4% over the last decade, but the total return in that time is a disappointing 20%. The rising yield has failed to compensate for the stagnating share price.

Balancing investment risk

Halma offers growth and consistency, albeit at a premium, while DCC provides a higher yield and potential recover potential if its energy focus pays off. A mix of the two could balance momentum and value, providing reliable income with some growth potential.

The post These 2 dividend stocks have increased their annual income payments for multiple decades appeared first on The Motley Fool UK.

Very high dividends come along from time to time. But over the long term, a steady progressive one can really help build superior wealth.

30 straight years

How does a 4.3% dividend yield sound? And what if it the figure has increased every year since stock market flotation in 1994?

I’m talking about DCC (LSE: DCC), the sales, marketing and support services group. It’s operated in oil markets, technology, healthcare, retail… and the diversification has helped smooth single-sector tough spells in the past.

But that’s changing, with the company in the middle of a transformation.

Focus on energy

In the words of CEO Donal Murphy in July’s AGM statement: “Our ambition is to be a global leader in the sales, marketing and distribution of energy products and services.” The company had, at the time, “reached agreement for the sale of DCC Healthcare.”

The question is whether the energy division will be able to generate the cash to keep that long-term dividend growth going. Right now, there seems to be plenty of cash, as DCC started a £100m share buyback in May. And it plans to return £600m to shareholders when the DCC Healthcare disposal completes.

DCC Energy does make up the bulk of the company’s business, so I think the potential is there. But there’s danger in these refocus days, and it might be a while before we see the shape of the result.

We’ll see your 30 years…

Croda (LSE: CRDA) has beaten DCC, with 34 annual dividend rises in a row. And the speciality chemicals maker currently offers a forecast 4.4% yield. The share price has had a tough time since 2022, however.

Croda’s earnings went into decline when it lost its Covid boost. Before then, its products had been in great demand for vaccines, medications, and related products.

Forecasts indicate an end to an earnings per share decline with a modest uptick this year… before steady growth sets back in. The key thing for me is that dividend rises continued during these past few years. And, perhaps crucially, earnings have managed to cover them, even if thinly. But cover should be rising again.

Interim boost

First-half results posted in July showed a 7.6% increase in adjusted EBITDA. The only worrying thing I saw was a 72% decline in free cash flow. And cash is vitally important for dividends. But at least the interim dividend was lifted, by 2.1%.

CEO Steve Foots said: “We have identified a further £60m of cost savings, taking the total to £100m of annualised savings by the end of 2027.” That should help the prospects for future dividends.

We have two very different companies here, both pursuing refocus and recovery. I view their chances of coming through their respective challenges with optimism. And I think income investors who believe they’ll retain their dividend focus should consider both.

The post These 2 FTSE 100 stocks have raised their dividends for 30 years in a row appeared first on The Motley Fool UK.

And one that’s caught my eye lately is the global sales, marketing and support services group DCC (LSE: DCC). Now, it’s not a household name like BP or Tesco, but it yields just under 5%, has a 13-year streak of dividend growth, and might be seriously undervalued — if analyst estimates are anything to go by.

What’s going on with the DCC share price?

Last month, DCC announced plans to offload its IT business, a minor division accounting for just 1% of operating profits. Yet investors didn’t take the news well. Despite raising $134.9m from the sale, the share price dipped – possibly because the net proceeds were deemed immaterial.

Still, the move’s part of a bigger picture. DCC’s simplifying its operations and in May it kicked off a £110m share buyback programme.

So far this year, the shares are down nearly 10%. But that’s where things start to get interesting.

The trailing price-to-earnings (P/E) ratio’s a lofty 22.5. But based on forward earnings, it falls to just 10.4 – a strong sign that analysts expect profits to bounce back.

In fact, out of 11 brokers tracking the stock, the average 12-month price target represents a 31% gain from today’s price. The boldest prediction? A 92% upside, with a target of 9,000p.

This is further supported by future cash flow estimates, which suggest DCC could be 44% below fair value right now.

A quality dividend stock?

Even if that bounce never comes, the income case alone looks compelling. The dividend per share is over £2 and has grown 10% a year for the past decade. That’s solid, and so is the payout ratio, which remains safely below 100%.

DCC has paid reliable dividends for over 20 years, making it one of the most consistent dividend stocks on the FTSE 100. It’s also got a strong balance sheet, with £594m in operating cash flow and 25% more equity than debt. Not bad at all.

What are the risks?

Not everything’s rosy. Profitability’s on the weak side, with an operating margin of just 2.56% and return on equity (ROE) at 6.75%.

Revenue growth’s down 9.3% year on year, while earnings growth’s down 36%. So if upcoming results disappoint, the price could fall even further.

There’s also the lingering threat of tariffs, which prompted Deutsche Bank to downgrade the stock in April due to global trade uncertainty.

So is DCC an undervalued gem? 

While the valuation looks good, there are clear risks here and a recovery isn’t guaranteed. Still, as a dividend stock with a long and reliable income track record, it ticks a lot of boxes.

Even if the recovery doesn’t arrive, investors are still paid handsomely to wait. And if it does? All the better. That makes it a stock worth considering in my book.

The post Analysts think this 5%-yielding dividend stock could be undervalued by 92%! appeared first on The Motley Fool UK.

Even the best investors get things wrong. And as Warren Buffett says, one of the most important things is being able to move on quickly when an investment doesn’t turn out as expected. 

The plan

My general view of DCC was that the entire company was worth much more than the sum of its parts. And the firm was looking to sell its healthcare and technology divisions to realise this value.

Analysts estimated these to be worth £2.1bn – over 33% of the firm’s market value. And with its balance sheet in good shape, the cash could be used for dividends or share buybacks.

That would leave the energy unit, which was making just over £500m a year in operating income. More importantly, it was growing at around 9% a year.

All of that sounds pretty good, but things haven’t gone according to plan. The divestitures haven’t – so far, at least – raised the expected cash and growth in the energy business is slowing.

What’s been going on?

DCC announced the sale of its healthcare unit earlier this year. But the £1.1bn sale price was a 15% discount to the £1.3bn analysts had been expecting.

Worse yet, the company’s full-year results for 2024 showed slowing growth in the energy business. And it’s started the year (beginning in April) with a slight year-over-year decline. 

The latest news is that DCC’s sold its UK and Ireland distribution business (part of its technology unit) for £100m. Given that it was essentially breaking even, that’s not a bad result.

That leaves the larger part of the technology division still to divest, but unless it achieves a surprising valuation, my overall thesis is going to come up short. So what should I do?

A dilemma

All of this leaves me with a dilemma. I’m a big believer in the benefits of being a long-term investor, but the underlying business looks a lot less attractive than it used to. There’s another £700m on the way via a share buyback, plus whatever the firm can raise by selling its remaining technology operations. The big question is whether or not that’s worth waiting for. 

DCC started buying back shares in May, but the stock has fallen 5% since then. So there’s no guarantee a falling share count will cause the stock to rally. 

Ultimately though, the biggest question is over the energy unit. The long-term outlook for the stock depends on that part of the company being able to keep growing. 

Thesis busted?

DCC’s energy division is on the edge of my circle of competence. I’d hoped the cash raised by divesting the healthcare and technology units would give me enough of a margin of safety. That hasn’t really happened. That’s obviously a disappointment, but that happens in investing. 

With a dividend on the way later this week, I haven’t (yet) lost much on this one. I’ve got my eye on some other FTSE 100 stocks, but I might wait and see how the rest of the restructuring goes.

The post After a 15% decline, should I move on from this FTSE 100 stock? appeared first on The Motley Fool UK.

Its name? DCC (LSE: DCC). Er, who? What? That may partially explain its low profile. The brand force is weak in this one. In an index packed with household names, retail investors could easily let this one slip by unnoticed.

I suspect that’s not the only reason. It isn’t immediately clear to the novice investor what DCC does, and therefore where its prospects lie. Its website merely tells us it “provides solutions the world needs across three transformative sectors: energy, healthcare and technology”. That doesn’t really clarify it for me.

Why did I call DCC a superstar?

That three-way business split doesn’t help either. Nor does share price performance. DCC is down 20% over the past 12 months, and 35% over five years. Hardly the sort of chart that gets investors fired up.

Yet there’s one thing that should make investors sit up and switch on to DCC: it has one of the most dazzling dividend track records on the FTSE 100.

It has increased shareholder payouts every year for the past three decades. I might even call it a dividend superstar.

That record continued after posting full-year results to 31 March on 13 May, when it hiked its annual dividend by 5% to 206.4p. Today, the stock yields 4.4%. That’s not the biggest yield on the index, but it’s well above the FTSE 100 average of around 3.5%.

If the past 31 years is any guide, DCC will continue to increase income for years to come — although, as ever, there are no guarantees.

It’s good to investors

Now DCC plans to simplify its set up. It’s agreed to sell its healthcare division for just over £1bn and will return £800m of that to shareholders, starting with a £100m share buyback.

Clearly, this is a company that puts shareholders front and centre. Always good to see.

Last year it generated free cash flow of £588.8m, with a conversion rate of 84%, suggesting it’s good for its dividend promises.

Management is shifting its focus to energy, which CEO Donal Murphy labels its “largest and highest-returning business”. This may give investors a clearer idea of what they’re buying into.

Another number that interests me is the price-to-earnings ratio, which is just 11.26. That looks like good value.

One for the back burner

This is exactly the profile of a stock I usually like. Yet, I still can’t get worked up to buy it. So I was interested to see what the analysts think.

On 19 May, RBC Capital Markets cut its price target by 200p to 5,200p. Although that’s still 12.5% higher than today’s 4,616p…

Yet, RBC also warned of weak recent trading and macroeconomic risks. It said DCC has defensive qualities, but “isn’t a table thumper”. It added: “There’s a risk the market continues to struggle to value it, as DCC Energy is somewhat of a conglomerate.”

That struck a chord. It explains why I never quite got it. Given recent performance, I don’t think I’ve missed out either. Sometimes even a 30-year dividend record isn’t quite enough.

The post Down 20% but yielding 4.5% — time to consider buying this FTSE 100 dividend superstar? appeared first on The Motley Fool UK.

But to build up the best retirement pot we can manage, we might want to add some with the best track records of rises. I’ve been digging some out.

British American Tobacco

British American Tobacco (LSE: BATS) has increased its dividend for 28 years in a row. The most recent rise of 2% for 2024 might not stack up brilliantly against inflation. But it still represents one of the FTSE 100‘s top yields with a forecast 7.3%.

Revenue in 2024 fell 5.2%, though that was due to the sale of the company’s businesses in Russia and Belarus in 2023. And it suffered some damage from exchange rates.

The main threat to the future of British American dividends is suggested by the words of CEO Tadeu Marroco: “We are committed to building a smokeless world and becoming a predominantly smokeless business by 2035.”

Whether it can achieve that while still raking in the cash to pay the same big dividends is a key question. But the company has already managed to shift 17.5% of its revenue to smokeless products. It remains a passive income consideration in my books.

DCC

DCC (LSE: DCC) offers a forecast yield of a more modest 4.3%. But with FY 2024 results released on 13 May, the company announced a “proposed increase of 5.0% in annual dividend, marking 31 consecutive years of dividend growth“. That rise is nicely ahead of inflation.

The services company has agreed the disposal of DCC Healthcare, expected to complete in the third quarter of the current year. The board says that will release £800m that it intends to return to shareholders, “commencing shortly with £100 million share buyback programme“.

The price for the healthcare division was lower than expected. And I fear we could see a disappointing price for the technology business, which the board also intends to offload.

Then we’ll have focus just on energy, which reduces diversification. I’m not thrilled by that aspect. But even with the risks, it’s on my list of passive income stocks to consider.

Croda

Croda (LSE: CRDA) offers a modest forward yield of 3.5%. But if it can keep boosting it the way it’s been doing for the past 33 years, I think it’s one that passive income investors could do well to consider.

Annual rises for the past couple of years have been behind inflation. But the speciality chemicals manufacturer has a habit of paying big special dividends when it has surplus capital.

That happened in the 2018 year with a 115p special, well ahead of the 87p ordinary dividend paid that year. And 2015 brought a 100p special dividend.

The main fear for me is that the business can be cyclical. And since a pandemic boost from chemical sales to vaccine manufacturers ended, the share price has slumped. But I’m eyeing up a potential recovery.

The post These FTSE 100 passive income stocks have raised their dividends for more than 25 years appeared first on The Motley Fool UK.

The business is in an interesting position and its latest news disappointed investors. But while I can see why, I think the lower share price is an opportunity.

What’s the news?

At the moment, DCC consists of three divisions – energy, healthcare, and technology. But its plan for the future is to focus on its energy business and divest the others. 

Earlier this week, the company announced it had agreed to sell its healthcare unit for £1.1bn. This was below the £1.3bn analysts had been hoping for and the stock fell as a result.

The difference might not seem like much, but it’s a 15% discount. And it means a lower return for investors, which is where the excess cash generated by the sale is set to go.

That’s why the stock fell 7% in a day. But despite the recent disappointment, I still think the valuation looks attractive at the moment. 

The equation

The deal’s an interesting one. DCC’s healthcare unit accounts for 15% of the firm’s operating income, but £1.1bn amounts to 23% of the market value of the entire company.

That however, doesn’t factor in DCC’s debt (which isn’t included in the deal). This means the implied price is around 15% of the firm’s enterprise value – in line with the unit’s contribution to operating income.

More importantly, profits at DCC’s healthcare division have been falling, while energy’s been growing. So while it’s 15% of operating income, it’s arguably not the most valuable 15%.

That’s why the stock still looks good value to me – and I’ve been buying it on this basis. But I think there’s also an important insight to be had about the current state of the market. 

The current situation

Investors might think DCC has achieved a disappointing price for its healthcare unit, but it’s not the only recent example of this. Both WH Smith and Dowlais have recently cut underwhelming deals.

Put simply, it doesn’t look like a great time to be selling businesses. In the context of DCC, that might be the biggest risk as the firm looks to divest its technology division. 

The other side of that coin though is that it’s a market for buyers at the moment. Lower prices means less risk and better deals for firms looking to make acquisitions.

Fortunately for me, I already have shares in companies that do this in my portfolio.

Investment returns

DCC’s deal might have fallen short of expectations, but I still like the stock. The firm plans to return the cash from the sale to investors and that could mean a big dividend’s on the way.

Getting up to 23% of the company’s current market value back in cash would take a lot of the long-term risk out of the investment. And that’s why I’ve been buying.

The post Meet the FTSE 100 stock I’ve been buying this week appeared first on The Motley Fool UK.