Can Computacenter's Rising Dividend Beat the FTSE?

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:

But there are companies that have managed to deliver a rising dividend throughout the last five years despite the terrible macroeconomic environment. One such name is Computacenter (LSE: CCC.L).

Computacenter describes itself as Europe's leading independent provider of IT infrastructure services. It advises its customers on their IT strategy, implementing technology from many suppliers, which it then manages under contract. With the shares at 354 pence, the market cap is 544 million pence. Here's the firm's recent financial record:

Since its formation in 1981, Computacenter has grown steadily and continues to grow. The dividend has increased by 88% during the last five years -- equivalent to a 17% compound annual growth rate.

Although the firm delivers on-site services in nearly 60 countries and supplies IT hardware and software to customers in more than 100 countries, it analyzes its performance according to five segments. Today it derives around 43% of turnover from its German segment, 38% from the U.K., 17% from France, and 2% from Belgium.

That big revenue from the German division continues to grow, and the directors see more opportunity there. But growth hasn't been without its challenges, although the company is making sound progress and the directors expect recent investment in staff and infrastructure to pay off in the future.

What I like about Computacenter's business model is that it gets its services into the heart of public organizations and large companies. When the daily functioning of these customers' operations is so reliant on IT systems, a trusted provider like Computacenter is essential, and it's hard for them to switch suppliers without risk.

That kind of repeat business leads to stable cash flows -- ideal for sustaining a progressive dividend policy.

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

1. Dividend cover: Covered three times by free cash flow and more than twice by earnings. Score: 5/5
2. N et cash/debt: There's a big net-cash pile sitting on the balance sheet. Score: 5/5
3. Cash flow: Net cash flow robustly supports profits. Score: 5/5
4. Outlook/recent trading: Recently, the directors' said the outlook is good. Score: 5/5

Overall, I score Computacenter 20 out of 20, which is the first time a company has achieved top marks in this series. That encourages me to believe the firm's dividend can continue to outpace dividends from the FTSE 100.

Foolish summary
Computacenter seems to be firing on all four cylinders with net cash in the bank, strong cash flow, a positive outlook, and a dividend that is well-covered by both cash flow and earnings. That said, the shares seem to be rating this growing company modestly. Given its apparent prospects, perhaps it's just the firm's exposure to Europe that's spooking investors.

Right now, the forecast full-year dividend for Computacenter is 16.34 pence per share, which supports a possible income of 4.6% for 2012. Given the 14% earnings growth predicted during 2013, that looks like an attractive valuation to me.

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