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2 FTSE 100 dividend stocks that I think will pay you for life

Rupert Hargreaves
3 generations putting their hands on top of each other

The FTSE 100 is full of high-quality dividend stocks, but one company that stands out to me right now is the pharma group Hikma Pharmaceuticals (LSE: HIK).

Booming market

Hikma sells branded and non-branded pharmaceutical products into the world’s ever-growing healthcare market.

The group’s generics business is its second-biggest division with sales of $690m to $720m expected this year. Its biggest division is Hikma’s own-brand injectables, which is projected to yield revenues in the $870m to $900m range for 2019.

Over the past six years, the firm’s top line has grown at a compound annual rate of nearly 9% as the company has benefited from the booming demand for pharmaceutical products around the world, and the launch of its own new treatments.

Going forward, I expect this trend to continue. Management has been focusing on building out the company’s injectables business for the past few years, where profit margins are roughly double those booked in the generics division.

For example, in the first half of 2019, Hikma launched 37 new products across all markets and increased R&D investment by around $10m to $72m for the first six months of 2019 as part of management’s goal to “build our pipeline of higher-value and complex products.

Future growth

Hikma is investing for the future, and this investment should translate into top and bottom-line growth in the years ahead. It is also good news for dividend hunters.

Over the past seven years, as the company’s net profit has jumped from $212m to $353m (projected for 2019), Hikma’s dividend per share has doubled.

Analysts are expecting further growth in the years ahead, as the payout is covered three times by earnings per share, which leaves plenty of room for additional dividend growth and investment in the business at the same time.

While the stock might not offer the highest dividend yield around (it currently stands at 1.8%) the stock’s track record of dividend growth makes this a dividend champion in my eyes.

Rapid growth

I believe that health care provider NMC Health (LSE: NMC) has the same attractive qualities as Hikma.

Demand for healthcare around the world is only growing, and NMC operates in some of the world’s most affluent and fastest-growing economies. Its primary market is the United Arab Emirates, but the company has expanded into Oman and Saudi Arabia in recent years.

And if the group’s growth over the past five years is anything to go by, these growth initiatives should lead to a surge in earnings for NMC over the next decade.

Since 2013, the company’s net profit has grown at a compound annual rate of 30%. Meanwhile, its annual dividend to investors has grown as a compound annual rate of 33%.

As NMC continues to rack up earnings growth in the 25%+ per annum range, I expect the stock’s dividend growth to continue as it has done since 2013.

Right now, the shares support a dividend yield of 0.6%, but this is expected to hit 1% for 2019, and 1.1% for 2020. Dividend cover stands at 5.5 times, which suggests to me that when the firm decides to slow its expansion plans, it could potentially double or triple shareholder payouts. That’s why I think NMC could pay you for the rest of your life.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended NMC Health. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.

Motley Fool UK 2019