Dividend scorers: companies that have increased dividends for 20 years (a score) or more

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Who are the companies that would rather sell their grandmothers than cut their dividend?

After 2020, when it was de rigeur to suspend dividend payments and in many cases bin them or reduce them, it is a wonder that there are still eight companies who have grown their dividend every year for 20 years or more.

Our records only go back 28 years but three listed companies have managed the full Monty: 27 years of year-on-year dividend growth.

Two of them, Halma PLC (LON:HLMA) and Spirax-Sarco Engineering PLC (LON:SPX), are from the engineering sector and one, Derwent London PLC (LON:DLN), is from the office property sector.

The current dividend yields on all three are not great but that’s not because the dividends are stingy; it’s because the other side of the dividend yield calculation – the share prices – have gone moon-bound.

Derwent’s share price has risen 909% over 27 years, Halma’s has risen 1,730% and Spirax-Sarco’s has zoomed up 2,610%. That explains why Derwent is only yielding 2.2%, Halma 0.7% and Spirax 1.0%.

Ironically, these dividend champions have actually been growth stocks.

Past performance is no guide to the future, as the old adage has it, but clearly, if these companies have the cash to carry on paying the dividends, they are very likely to do that.

Dividend cover

On that subject, if we look at the dividend cover ratios for Derwent, Halma and Spirax, they aren’t too shabby; even Derwent, which must be hurting as a result of the pandemic, has dividend cover (earnings per share/dividend) of 1.4, although that pales in comparison to Halma (3.5) and Spirax (2.4).

Earnings are not the same as cash, mind you, and many analysts prefer free cash flow dividend cover to earnings per share. On this score, Halma (3.1) and Spirax (2.0) score well but Derewent’s ratio is negative at -1.2.

The rest of the group of London-listed stocks that have increased their dividends for 20 years or more comprises J Smart & Co (Contractors) PLC (LON:SMJ), Kerry Group PLC (LON:KYGA), Croda International PLC (LON:CRDA), Diploma PLC (LON:DPLM) and The Sage Group PLC (LON:SGE).

If you look at the table below, you’ll see none of them is yielding a fantastic amount but most are offering yields that are better than you get from most savings accounts (assuming the dividends are at least maintained).

The best of the bunch is accountancy software group Sage, which is yielding 2.9%, and that’s after a group-leading share price gain of 5,310% over 27 years. Dividend cover and free cash flow cover are both decent; anything over 1.5 is probably fairly safe.

J Smart is the next best yielder, which is some compensation for a measly 176% share price appreciation over 27 years. With a dividend cover of 2.9 and a free cash flow cover of 3.3 suggests the board could afford to be a bit more generous.

Company

Ticker

Successive years of dividend growth

Dividend yield

Dividend cover

Free cash flow cover

Share price gain over 27 years

Derwent London

DLN

27

2.2%

1.4

-1.2

+916%

Halma

HLMA

27

0.7%

3.5

3.1

+1,720%

Spirax-Sarco

SPX

27

1.0%

2.4

2.0

+2,610%

J Smart

SMJ

26

2.6%

2.9

3.3

+176%

Kerry Group

KYGA

26

0.8%

4.0

4.8

n/a

Croda International

CRDA

22

1.9%

1.9

1.5

+1,450%

Diploma

DPLM

20

1.2%

1.9

2.2

+2,210%

Sage Group

SAGE

20

2.9%

1.6

1.9

+5,310%

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