What FTSE shares might raise their dividends annually for the next half century?

Like loads of buyers, I admire the passive earnings streams that may come from proudly owning dividend shares. Quite a few FTSE 100 shares have wonderful monitor information not simply of paying dividends, however of elevating them yr after yr.

British American Tobacco has been doing that because the final century. Diageo has been elevating its dividend yearly for over 30 years. In the meantime, Spirax (LSE: SPX) has grown its dividend yearly for over half a century.

What I’m on the lookout for now

Previous efficiency is just not essentially a information to what’s going to occur in future, though I do really feel that if enterprise efficiency permits for it, most boards can be nervous about stopping the kind of lengthy streak of progress in shareholder payouts achieved by these Dividend Aristocrats.

Whereas I like Spirax’s enterprise and can be joyful to personal the shares, I’ve no plans to purchase them on the present valuation. The value-to-earnings ratio of 29 is simply too excessive for my style even for such a strongly performing firm.

That valuation additionally implies that, even in spite of everything these many years of annual dividend raises, the yield is at present 2.1%. That’s notably lower than the common provided by all FTSE 100 shares, not to mention the high-yielding ones.

Nonetheless, I feel Spirax’s monitor document might help me when attempting to find shares which will probably ship a future dividend monitor document prefer it has previously half century – and are moderately priced now.

Large spending prospects with few doable options

One clue is in Spirax’s buyer base. If you’re operating a manufacturing facility and a chunk of your equipment immediately breaks, the potential price of the delaying stoppage could also be large. In such conditions, prospects want an answer urgently.

That may imply they’re kind of insensitive to cost. It could actually additionally imply they need to cope with a recognized amount within the sense of a agency they’ve discovered dependable previously.

So, Spirax’s concentrate on industrial prospects and its enterprise mannequin of supplying and sustaining usually bespoke thermal power engineering options to them is sensible, in my opinion.

Additionally sensible is the truth that the FTSE 100 agency has chosen to function in areas the place competitors is restricted, giving it much more pricing energy. An instance is the corporate’s specialisation in what are referred to as Watson-Marlow pumps. Because of its proprietary know-how, Spirax has a novel benefit over opponents.

That stated, one danger in such a mannequin is getting grasping. Pricing energy is all effectively and good – however it will probably inspire rivals to generate progressive options at decrease price.

Traders who love dividends love boards that love dividends!

However whereas having a enterprise that appears set to generate sizeable and growing free money flows might help fund common dividend progress, it’s not sufficient.

In spite of everything, numerous firms generate giant free money flows with out paying dividends. I additionally look for an organization’s coverage to see whether or not it has what is named a progressive dividend coverage. Which means the acknowledged intention is annual progress in dividend per share.

That could be a objective and will not in the end occur. However I see such a coverage as a optimistic sign that an organization’s board is focussed on making an attempt to develop its dividend yearly.