Yahoo Finance This under-the-radar FTSE 100 share has hiked dividends 13.7% a year for a decade. Time to buy?
This FTSE 100 share has flown under my radar for far too long and I’m kicking myself as a result. Distribution group Diploma (LSE: DPLM), which supplies technical products and services to companies in North America and Europe, has a brilliant track record of long-term share price and dividend income growth.
In my defence, the business doesn’t immediately catch the eye. It makes unglamorous industrial products such as seals, gaskets, filters, wiring, connectors and fasteners for businesses. Yet it’s been flying lately.
Full marks for this share
On 13 May, the Diploma share price hit a record high after the board posted a 17% rise in adjusted half-year earnings. These were boosted by six new acquisitions in the period, including Peerless for £236m and PAR Group for £38m.
The stock’s jumped 33.36% over the last year and a staggering 166.54% over five. I really do need to adjust my radar settings if they missed that.
It rewarded loyal shareholders by increasing the interim dividend by 5% to 17.3p a share. There’s nothing new about that. It has one of the best dividend track records on the entire FTSE 100.
It has increased shareholder payouts by an average rate of 13.7% a year for a decade. This figure’s courtesy of AJ Bell, whose investment director Russ Mould said the group benefits from selling products “without which its customers would struggle to operate”.
The board has also shown how careful acquisitions can supplement the momentum that exists within a company, rather than trying “to conjure up growth from nowhere”, Mould adds.
I’d never have imagined Diploma was such a top FTSE 100 Dividend Aristocrat by looking at the headline yield, which is just 1.36%. Yields can be misleading, of course. They’re calculated by dividing the dividend per share by the share price. So if the share price climbs, the yield falls, even if the board is progressive, as this one is.
Diploma’s hiked its annual distribution for 23 consecutive years, and is set to make it 24 this year.
FTSE 100 income hero
I may have overlooked the stock but others haven’t. The shares aren’t cheap now, trading at 36.36 times earnings. That’s the price of success.
Given the range of value added products it sells, and the different sectors it sells across, I find the company’s prospects hard to gauge. My major concern is that if the global economy stumbles, demand for its products will fall, hitting demand and profits. With the US economy slowing, the next year or two could be harder.
CEO Johnny Thomson is upbeat, forecasting constant currency revenue growth of around 16%. Operating margins should rise 80 basis points to around 20.5%.
I don’t have money in my account to buy Diploma today, otherwise I would. Fingers crossed the shares aren’t even pricier when I do have the cash.
The post This under-the-radar FTSE 100 share has hiked dividends 13.7% a year for a decade. Time to buy? appeared first on The Motley Fool UK.
More reading
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2024
