If you are looking to invest £10,000 in FTSE 100 dividend growth stocks, right now I think you’re spoilt for choice.
One of the best dividend growth companies in the FTSE 100, in my opinion, is Intertek (LSE: ITRK). Its business of quality assurance testing might not be the most exciting, but it’s an essential one, and it’s one where reputation counts for everything.
Companies are willing to pay for quality as long as they know they’re going to get the best results. It’s just not worth skimping on price for a lower quality test only for the product to then break when it gets to the consumer.
Through a combination of organic growth and bolt-on acquisitions, Intertek’s sales and earnings have grown at a compound annual rate of 5.1% and 10% per annum, respectively, since 2013. This growth has allowed the company to pursue an effective progressive dividend policy.
The payout has risen at a compound annual rate of 16% since 2013 and today, the stock supports a dividend yield of 2%. That might not seem like much, but the distribution is covered twice by earnings per share. As Intertek’s bottom line continues to expand, I see no reason why the payout cannot continue to grow at a double-digit growth every year for the foreseeable future.
Another defensive dividend stock I think is worth your research time is private healthcare provider NMC Health (LSE: NMC). Once again, with a dividend yield of only 1% at the time of writing, this stock is hardly going to win any awards for yield. However, it’s the company’s dividend growth that I’m interested in.
As net profit has jumped four-fold over the past six years, NMC’s distribution to investors has grown from $0.04 per annum to $0.29 (projected for 2019). That’s a compound annual growth rate of 33%.
City analysts are forecasting earnings growth of more than 25% for the next two years, which should give the company plenty of financial flexibility for further dividend increases in the years ahead.
On top of this, the payout is covered more than five times by earnings per share. This implies earnings could drop by more than 50% and NMC would still have enough money coming in to afford its dividend — that’s what I call a secure income stream.
You dirty rat
If NMC’s earnings are rising off the back of increasing demand for healthcare, FTSE 100 business Rentokil (LSE: RTO) is benefiting from the world’s growing rodent population.
Urbanisation and rising global temperatures have led to an explosion in rodent infestations, and Rentokil is the first company many people call when they have a problem.
OK, that’s not strictly true, as the company operates under a range of different brands, so customers don’t call Rentokil directly, they call their local branch. This approach has worked well for the business. By buying up local operators, it has been able to grow swiftly and maintain the goodwill these firms have built with their customers over the years.
As the company has consolidated the global market for pest control, investors have reaped the rewards. Rentokil’s dividend per share has increased by 14% per annum, on average, since 2013. I see no reason why this trend cannot continue. The payout is covered nearly three times by earnings per share, leaving plenty of headroom for growth in the years ahead.
- No savings at 40? I reckon you can retire rich with these tips
- Forget the Bitcoin price! Here's how I'd invest £10k to make a million
- I’ll hold this 11% FTSE 100 dividend yield in my ISA for at least 10 years!
- Forget buy-to-let. I’d aim for a multi-million pound retirement portfolio this way
- How should I invest £10k? 2 reasons why Warren Buffett’s advice could be worthwhile
- Top shares for 2019
Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended NMC Health. The Motley Fool UK has recommended Intertek. 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