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Who doesn’t like earning dividends from a stock and then watching those dividends grow over time? Many British companies have a good history of dividend growth.
Past performance is not necessarily indicative of what may happen in the future. But here are three UK shares that I think have the potential to grow their dividends consistently in the coming years.
Feniks Group
Insurer Feniks Group (LSE: PHNX) is not a household name, although this may change with the planned name change to Standard Life.
Well-informed investors have an idea of ​​the company’s dividend yield of 7.6%, the highest of all FTSE100 company apart Legal and general.
Like Legal & General, Phoenix aims to boost its dividend per share every year. It has done so over the last few years.
The financial services business focuses on savings and retirement. With approximately 12 million customers, it is a very significant company.
It also generates cash to a vast extent, which helps boost its dividend. Phoenix businesses benefit from economies of scale, long-term policies and proven investment vehicles.
One risk I see is that a real estate downturn will force Phoenix to write down the value of its mortgage book. Overall though, I think this is a UK share that investors should consider.
Cranswick
Another name that is unlikely to come out of most people’s mouths is Cranswick (LSE: CWK).
Although many people may not be familiar with FTSE250 food, some of its products may well have passed through their mouths. Cranswick’s customer list includes a significant proportion of national retailers who sell the company’s products under their own names.
Demand is likely to remain high: people need to eat and Cranswick has developed competitive prices and economies of scale.
However, economies of scale are not always positive. Allegations of cruelty last year at some of the company’s vast pig farms have threatened its reputation. That’s why I was pleased to see that the company had commissioned an independent review of how it treats and responds to its pigs.
Cranswick has increased its dividend per share for 35 years in a row.
Last year’s dividend was more than doubled by diluted earnings per share. I think with good business results it can continue to grow.
However, at 18 times earnings, Cranswick’s share price is not currently attractive enough for me to add a 2% yield to my portfolio.
Dunelm
It wasn’t a good month for household goods retailers Dunelm (LSE:DNLM). Since the turn of the year, the company’s share price has fallen by 15%.
This means it is 19% below the level of five years ago. At today’s price, I think investors should consider this UK stock now.
The share price decline was partly due to a profit warning earlier this month. There is a risk that tender consumer spending could impact demand for certain Dunelm product lines, negatively impacting revenues and profits.
However, I believe that it is a well-run business with a powerful market position. He has proven his model over many economic cycles. I expect it can continue to generate significant cash flow.
The company’s special dividend has been postponed. However, in recent years, the ordinary dividend per share has increased year over year.
I believe the business is powerful enough to continue this trend. Regular dividends alone currently offer a yield of 4.7%.
