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I’m a agency believer that the best and most secure method to construct wealth over time is to spend money on high-quality FTSE 100 blue-chip shares that prioritise rising shareholder returns. So once I unearthed a enterprise that has grown its dividend per share at a compound annual development price of 9.5% for over three a long time, my curiosity ranges perked up.
Distribution powerhouse
The inventory is worldwide distribution and companies specialist Bunzl (LSE: BNZL). This enterprise distributes predominantly goods-not-for-resale together with packaging and non-food consumables. Its prospects vary from giant retailers to small impartial retailers and eating places.
The inventory hit the headlines earlier within the 12 months when it issued a uncommon revenue warning, after income and working revenue declined in North America, its largest market. A mixture of poor technique execution, deflation and a big buyer loss, led to the share value shedding 1 / 4 of its worth in a day.
Misfiring technique
Over the previous couple of years the enterprise has pivoted towards rising its portfolio of higher-margin, own-branded, sustainable packaging options. These embody the likes of ecosystems, verive and maintain. In 2024, such merchandise accounted for 14% of complete gross sales, up from 5% the earlier 12 months.
Complementing this pivot, it modified the organisational construction from a predominantly branch-based one to a gross sales and operational mannequin. Hiring a centrally-managed skilled gross sales staff labored properly for giant nationwide accounts. Nonetheless, it turned out to be fully the fallacious mannequin for managing smaller, native accounts.
Centrally-managed gross sales groups discovered themselves being value undercut by smaller, native and extra nimble rivals.
Massive accounts have additionally suffered due to poor technique execution. The enterprise additionally disclosed it had misplaced a high-margin buyer, though it failed to call it.
Dividends
The falling share value has pushed the trailing dividend yield as much as 3.1%. That is significantly increased than its long-term common of two.5%.
The corporate won’t be a giant dividend payer however it’s long-term development that issues extra to me. Final 12 months, it hiked the dividend per share by 8.2%. Dividend cowl’s additionally comfortably above two instances earnings. This gives the enterprise with loads of headroom to extend payouts once more this 12 months.
Acquisitions
Over the a long time the corporate’s grown from a small, regional participant into a world powerhouse by an aggressive acquisitions technique. In 2024, 13 new companies have been swallowed up into the Bunzl model, at a price of £883m. The most important of those was UK-based omni-channel distributor of catering gear, Nisbets. It additionally acquired its first enterprise in Finland, Pamark.
Such an acquisition binge doesn’t come with out threat. For instance, quickly after shopping for Nisbets, its automated warehouse flooded. Nonetheless, the fragmented nature of the business gives Bunzl with a rare pipeline of additional development alternatives.
Throughout all its key sectors, long-term structural development drivers stay in place. Throughout healthcare, this contains the expansion of care at house and ageing populations. In grocery, it’s the push for sustainable packaging and the outsourcing of non-food necessities. And in meals companies, this contains the expansion in takeaways and residential deliveries.
I view the latest firm woes and share value weak spot, as a inventory to think about. It actually is on my watchlist for when I’ve out there free funds.
