LONDON -- The last few years have been tough for investors relying on the FTSE 100 (INDEX: ^FTSE) to deliver a rising dividend payout.

Looking at the iShares FTSE 100 ETF (LSE: ISF.L), an exchange-traded fund that tracks the benchmark index, we can see that the aggregate payment from Britain's top 100 companies has yet to regain its prerecession peak:







Dividend per Share (pence)






Still, there are companies out there that, despite the banking crash and gloomy economy, have managed to deliver a rising dividend throughout the last five years. One such name is ambitious supermarket chain Wm. Morrison Supermarkets (LSE: MRW.L), which ranks No. 50 in London's premier FTSE 100 index in terms of its size.

If you don't know, Morrison is a U.K.-focused supermarket group that is expanding across Britain. It took a big step forward when it acquired the chain of British Safeway stores a few years ago, and it continues with an active expansion program to increase its share of Britain's food and fuel spending. With the shares at 269 pence, the market cap is 6.6 billion pounds. This table summarizes Morrison's financial record:







Sales (millions of pounds)






Profits (millions of pounds)






Earnings per Share (pence)






Dividend per Share (pence)






So the dividend has increased by 123% during the last five years -- equivalent to, roughly, a 22% compound annual growth rate.

Morrison is expanding southward from its northern roots. In order to appeal to a wider section of society, it is making visible changes in the stores. For example, the traditional in-store pie shop now sits alongside new initiatives like its fresh-food concept, Fresh Format. Exotic fruits and vegetables temptingly arranged and bathed in swirling mist lift the stores' image to an altogether higher level. When I go to the local store, it feels fresh and vibrant, and there's something to appeal to most preferences.

These types of growth initiatives are encouraging. Morrison intends to roll out Fresh Format during 2012, and it sits well with other plans. For example, there are the first three "M local" convenience stores that are performing well; the launch of, scheduled for late 2012; the recent acquisition of Flower World; and planned investments in meat and fish that are designed to progress the vertical integration of the supply chain.

If the dividend is to keep on rising, growth is important, and Morrison seems to be on the case. There's only one slight concern in that the long-serving CFO has recently handed in his notice. I think the company will get over that quickly, and the news is counterbalanced by the fact that the CEO has been in place long enough to warm his seat up, but not so long that he's got nothing to prove.

Morrison's dividend growth score
I analyze three different features of a company to judge whether its dividend can continue to rise:

  1. Dividend cover: Earnings cover the dividend more than twice. Score: 4/5
  2. Net cash/debt: There's modest net gearing of around 27%. Score: 4/5
  3. Outlook/recent trading: Growth is still on offer at Morrisons. Score: 4/5

Overall, I score Morrison 12 out of 15, which encourages me to believe the firm's dividend can continue to outpace dividends from the FTSE 100.

Foolish checkout
Investors traditionally view supermarkets as something of a defensive proposition. Indeed, groceries and fuel are repeat-purchase consumables, and regular visits to a familiar supermarket can be habit-forming.

Within that trading environment, Morrison's steady drive for growth, its conservative financing, and its steady hand on operational execution bode well for the sustenance of its progressive dividend policy, in my view.

Right now, the forecast full-year dividend for Morrison is around 12 pence per share, which supports a possible income of 4.5%. That looks attractive to me.

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