A Rock-Solid UK Dividend Stock

12/14/2011 4:16 pm EST


There are few things better for an income investor than a company that has such a rock-solid dividend it has not missed increasing it for a quarter of a century, observes Alan Oscroft of Motley Fool Europe.

There’s a small handful of FTSE companies that have managed long stretches of rising dividends, but there are few to match Domino Printing Sciences (London: DNO), which has boosted its payout every year for more than 25 years now.

And in this week’s full-year results, it did it again. Domino, which specializes in high-end printing technology, reported a 5% rise in turnover, to £314 million ($483.9 million), providing a 10% boost to pre-tax profit, at £57.4 million.

And as for that great dividend run, this year’s total payout comes to a forecast-busting 18.75p, which is 20% more than last year’s 15.62p, and is twice covered by earnings of 37.2p per share. And where most companies carry debt, Domino had net cash of £22.8 million.

A good bit of this year’s improvement was due to sales of some attractive products, with new models accounting for a fifth of sales. (The company spent £15 million on R&D this year, but that’s what it takes to stay ahead in this high-tech game.)

Things did slow a little in North America, but stronger sales in the UK and in the developing markets of China and India made up for that, and Domino plans to increase its operations in both of those countries.

Buy on the Dips
Domino’s share price has fallen back a little recently after a pretty strong run, once it became clear earlier in the year that tough economic conditions were going to result in a second-half slowdown. And that means they’ve got to be worth a closer look.

At the current price of 502p, the stock has a yield of 3.7% and a P/E of 13. That’s not "fill your boots" territory, but the latest forecasts suggest 4% for next year.

For a debt-free company with such a great track record, in a business that has a strong future, I don’t think the share price is overstretched. I expect Domino to reward its shareholders well over the next decade.

Read more at Motley Fool Europe here…

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