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I like proudly owning FTSE 100 shares that pay me dividends. I prefer it much more if these dividends develop. I prefer it a lot extra nonetheless if that development lasts for many years.
There’s a caveat although. Though I like shares with nice dividend monitor information what I wish to purchase are ones I feel have nice dividend prospects – with out overpaying for them.
UK Dividend Aristocrat
That brings me to 1 FTSE 100 share that has an unimaginable document of elevating its dividend yearly, for over half a century. That makes it what we name a Dividend Aristocrat. Not solely that, however I reckon the enterprise has nice potential each now and sooner or later.
The agency in query is Spirax (LSE: SPX). Many individuals haven’t heard of this FTSE 100 member, maybe as a result of it’s an industrial enterprise that sells to different firms. However from a industrial perspective, I feel there’s a lot to love concerning the enterprise mannequin – and what it means for dividend potential.
Resilient demand, confirmed mannequin
Over its lengthy existence, Spirax has honed a enterprise mannequin that concentrates on some particular engineering wants clients could have. For instance, though steam could seem to be the expertise of a bygone period, it at the moment has all kinds of business purposes.
By promoting and servicing gear that may assist clients realise these purposes and people of varied industrial fluids, Spirax has discovered a really profitable area of interest.
When a consumer’s machine stops working, enterprise interruption prices may be substantial. That offers Spirax pricing energy. It additionally implies that demand may be sturdy even throughout an financial downturn.
I’d fortunately personal this share
Issues could not all the time go easily. For instance, one threat I see is softness in demand within the Chinese language market persevering with – and maybe spreading to different markets. That might damage revenues and income in coming years.
However I’d be blissful to personal the share for the long run – if I might purchase it on the proper worth.
Not but a discount
The Spirax share worth has been falling. Certainly, the share now prices 36% much less than it did at first of the 12 months. Over 5 years, the decline has been 22%.
However does that imply it’s now good worth? Not essentially. Spirax is buying and selling on a price-to-earnings ratio of 25. That also seems costly to me. I don’t really feel it provides me a adequate margin of security as an investor, ought to Spirax‘s enterprise efficiency be worse than I hope.
For that cause, I don’t really feel now could be the time for me to purchase the FTSE 100 share for my portfolio.
I proceed to love the enterprise mannequin and the dividend prospects it offers. However the worth to me is just not enticing. So I’ll wait and watch, within the hope that sooner or later I might be able to purchase Spirax shares at what I regard as a horny valuation.
