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Dividend stocks are a great way to build long-term wealth, and all three of these stocks have one special feature. So what makes them so special?
Only a dozen FTSE100 companies have increased dividends for at least 25 years in a row, and sometimes longer. This is an extremely impressive achievement because it means generating cash to fund shareholder payouts for good and bad decades after decades. These three really intrigued me.
Halma is an income heroine
Halma (LSE: HLMA) is the first. Many investors wouldn’t even recognize this company as a dividend stock because the yield is only 0.65%. This low efficiency hides real power. The share price is up an incredible 33% in the last year and 70% in two years, which lowers the headline yield.
Despite today’s market volatility, Halma’s share price continues to rise. First-half results published on November 20 showed revenue growth of 15.2% to £1.23 billion and a 210 basis point augment in margins. The board also increased the interim payment by 7% to 9.63p. It has increased its dividend for 45 consecutive years, with a yield of 6.9% over the last 15 years.
Nothing is without risk. Halma earns gigantic sums of money overseas, so changes in currency rates may impact results. The price-to-earnings ratio is currently 37.6, which is well above FTSE100 average around 18. So it’s not inexpensive. Investors may still consider buying if the stock market falls, assuming Halma will also fall. Maybe not.
DCC rewards shareholders
Marketing and Support Services Group DCC (LSE: DCC) has raised its dividend for 31 years in a row. It is in the midst of a major strategic shift as CEO Donal Murphy works to transform it into a global leader in energy distribution, but this could be an opportunity for long-term investors.
DCC stock has disappointed recently, falling 13% for the year, but as a result the valuation looks attractive with a P/E ratio of just 12. The trailing yield is 4.22% and the dividend has grown at an average annual rate of 8.97% over the past decade.
On November 17, DCC said it would return up to £600 million to shareholders in a tender offer funded by the £1 billion sale of its healthcare division. Every transition comes with risk, but for long-term investors this may be a time to take a second look.
Sage Group looks powerful
My third long-term dividend superstar is Sage Group (LSE: SGE). Shares of the software provider are up 80% in five years, but are down 16% in the last 12 months. I’ve been watching this one for a while. The valuation was always too high for me at around 33 times earnings, but today it’s closer to 26 times. Still steep, but better quality than before. Sage has earned its premium price.
It increased its dividend every year for an impressive 37 years. So don’t be fooled by this modest rate of return of just 2%. Over the last 15 years, payouts have grown at 7.11% annually. Threats include a slowdown in the global economy and the threat that artificial intelligence could undercut some services.
Nothing lasts forever, but these three companies show how determined, well-run companies can reward investors with share price increases and dividend increases for decades. I keep my fingers crossed that it lasts. There are also many other great FTSE 100 dividend stocks in the index.
