LONDON -- In an outcome that's tough on investors, the FTSE 100 has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF, for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|---|---|---|---|---|---|
|
Dividend per share (pence) |
19.1 |
20.2 |
17.1 |
16.2 |
18.1 |
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 Amec (LSE: AMEC).
The big question is: Can the company's dividend continue to out-perform its index? Let's take a closer look.
Amec is an international project management and services company. With the shares at 1007 pence, the market cap is 3,059 million pounds. This table summarizes the firm's recent financial record:
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|---|---|---|---|---|---|
|
Revenue (million pounds) |
2,356 |
2,606 |
2,539 |
2,951 |
3,261 |
|
Net cash from operations (million pounds) |
98 |
(11.7) |
169.5 |
134 |
173 |
|
Adjusted earnings per share (pence) |
36.9 |
45 |
47.8 |
64 |
71.9 |
|
Dividend per share (pence) |
13.4 |
15.4 |
17.7 |
26.5 |
30.5 |
So, the dividend has increased by 128% during the last five years -- equivalent to a 22.8% compound annual growth rate.
Describing itself as one of the world's leading engineering, project management, and consultancy companies, Amec serves the oil, gas, mining, clean energy, environment, and infrastructure markets. The firm reckons it delivers and maintains strategic assets from environmental and front-end engineering design before the start of a project, to decommissioning at the end of an asset's life. It counts big names among its clients, such as BP, Shell, EDF, National Grid and the U.S. Navy, and has offices and projects in around 40 countries employing some 29,000 people.
Recent management guidance has been upbeat. There's an order book worth about 3.6 billion pounds and the firm's enjoying particularly good progress in the oil and gas sector. In fact, the directors are confident enough to predict double-digit revenue growth during 2013. If strong flows of free cash result from that revenue, there's every possibility of continuing progress for the dividend, too.
Amec's dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:
- Dividend cover: Earnings covered last year's dividend more than twice. 4/5
- Net cash or debt: At the last count, there was net cash on the balance sheet. 5/5
- Cash flow: Cash flow has been moving with profits. 3/5
- Outlook and recent trading: Good recent trading and a positive outlook. 5/5
Overall, I score Amec 17 out of 20, which encourages me to believe the firm's dividend can continue to outpace dividends from the FTSE 100.
Foolish summary
With net cash on the balance sheet, a well-covered dividend, and a positive outlook, the prospects for the dividend look encouraging.
Right now, the forecast full-year dividend is 37.84 pence per share, which supports a possible income of around 3.7%. That looks attractive to me.
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