LONDON -- In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|---|---|---|---|---|---|
| Dividend per share |
19.1p |
20.2p |
17.1p |
16.2p |
18.1p |
But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is Croda International
The big question is can the company's dividend continue to outperform its index. Let's take a closer look.
Croda manufactures specialty and industrial chemicals used in many everyday items and its products appear in things like cosmetic creams and lotions, dietary supplements, foods, plastic bags and vehicles. With the shares at 2303 pence, the market cap is £3216 million. This table summarizes the firm's recent financial record:
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|---|---|---|---|---|---|
| Revenue (£m) |
805 |
911 |
828 |
1002 |
1068 |
| Net cash from operations (£m) |
(56) |
57 |
155 |
132 |
164 |
| Adjusted earnings per share |
29.7p |
48p |
53.8p |
95.4p |
122.5p |
| Dividend per share |
15.75p |
19.75p |
21.5p |
35p |
55p |
So, the dividend has increased by 249% during the last five years -- equivalent to a 36.7% compound annual growth rate.
Croda employs about 3400 people to produce specialty chemicals for many industries in around 34 countries. The firm manufactures products in areas such as personal, health, crop, and home care, polymers, coatings, lubricants, processed vegetable oils, and industrial chemicals. Last year, around 43% of revenues came from Europe, 35% from the Americas, 17% from Asia, and 5% from the rest of the world.
You can see from Croda's trading record that business has been brisk and growing. That seems to be a trend set to continue as the company rolls out its forward strategy of "concentrating on high value, niche markets with innovative technologies, supplying to customers both large and small around the world." Indeed, although European trading has been bumpy recently, there's been good growth from Croda's other markets around the world. That makes the prospects for continued dividend progression look encouraging.
Croda's dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:
- Dividend cover: adjusted earnings covered the last dividend around 2.2 times. 4/5
- Net cash or debt: net gearing is around 64% with borrowings about 1.5 times earnings. 4/5
- Cash flow: cash flow supports earnings and both are trending up. 5/5
- Outlook and recent trading: reasonable recent trading; a cautiously positive outlook. 4/5
Overall, I score Croda 17 out of 20, which encourages me to believe the firm's dividend cannot continue to outpace dividends from the FTSE 100.
Foolish summary
There is a good record of cash generation, under control debt, and a positive outlook. Earnings comfortably cover the dividend, which looks good for continued growth.
Right now, the forecast full-year dividend is 61.24 pence per share, which supports a possible income of around 2.7%. That's a little rich for my taste, so Croda can stay on my watch list, for now.
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