#103 March Dividend Purchase Review

It seems rather grandiose of myself to say this, but if anyone reads this - this is for my own purposes, it is my own research, and frankly I have no idea what I'm doing. So please don't take this as financial advice or sue me when everything goes Pete Tong. 

3 stocks reviewed for my first dividend portfolio stock purchase since March 2018.

Bunzl - BNZL
Diageo - DGE
Bellway - BWY


#1 BNZL


Info:
A stock I don't own in a sector I do not own, hardly surprising though as I have a portfolio of 2 currently.

Support services sector. Global company. Products distributed include machinery & safety and hygiene equipment for food processors and chemicals, packaging and disposable tableware for caterers and retailers.

So sounds boring as hell. Delightful. Never previously reviewed.

Share price 52-week high is £25 per share. 52-Low is recent £19.80. Currently available just under £20.

Dividend Record: 

This is what drew me to them in the first place.

27 years of consistently paying and increasing their dividend. With an average annual growth of 7.7% over the last 5 years, although 2019 was their lowest with only a 2.19% growth.

A current yield of 2.6% is just above my guide of 2.5%. Overall 👍

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. ✅ They've grown YOY for the last 7 years.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅ 2.6
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅ Averages 48% over last 7 years. Never been above 53%
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. ❌Share price has been a bit up and down lately, mainly due to Coronovirus probably. Unfortunately, currently sitting at 19. 
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅Averages of 24% and 5.7% for the last 3 years. So not massively over, but ticks the box.

Conclusion:

Strong dividend history, no reason to expect this to change based on cover and payout ratio.
Financials all look good, if the margins are only just above the guide I've set myself. PE ratio slightly above too
But in the end a big 👍 for BNZL from me. This is a recommended BUY for me.


#2 DGE

Info:
A company I don't own within a sector (Beverages) I don't own.
A global alcoholic drinks company with brands such as Smirnoff, Johnnie Walker & Guinness.
Previously reviewed in March 2018 and marked as WATCH. I was aiming for higher yields back t✅✅✅hen.


Dividend Record:

Dividends have increased YOY since 1998, 22 years at present.

Over the last 5 years averaging an increase of 5.4% annually.

Price is currently £27.81 which is the lowest it's been for 14 months. 52 week high is £34.58

Current yield is 2.5% so meeting the guide in my screen.

Overall very positive. 👍


Financials:

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year.
1. ❌They've increased YOY for the last 4 years. 2015 saw a slight decline from 2014.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅2019 was 1.91 but consistently above 1.5 for previous 5 years.
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅In the last 2 years no. But they have in 2 of the previous 5 years paid out >60%. 62 and 66% so not hugely over.
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18 
1. ❌ currently at 21.66
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅This is where they trump BNZL. Gross is on average 60% over last five years. Net 30%.

Conclusion:

Really strong dividend history, which based on cover and payout ratio appears sustainable. Really good operating margins. EPS and PE ratio only negatives.
But in the end 👍 I'd be more than happy to invest here. Recommended a BUY for me.

#3 BWY

With 2 recommended buys can Bellway make it a hat-trick and make my decision even harder for where to invest next?

Info:
A company I do not own, in a sector I do not own. A UK residential property developer.
Previously reviewed by me in March 2018, with a BUY recommendation.

Dividend Record:

Dividends increased YOY for the last 12 years. However, they were reduced in 2008 and 2009. Unlike the DGE and BNZL.

YOY increases for the last 5 years has averaged nearly 25%. However, this has tailed off to only 5% in the previous year.

Share price is currently £36.77. 52 week high is £43.36 and 52 low is £26.56.

Current yield is the highest of the 3 reviewed today @ 4.1% nearly two thirds higher than the other two. Overall 👍


Financials:

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. ✅ Increased YOY for last 10 years.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅ Average is 2.9 over last three years.
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅ Averages 30% over the last five years.
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18 
1. ✅ Very low, 8.60
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅Gross margin averages 25% for last 5 years. Operating margin around 21% 

Conclusion:

Somehow I've got a hat-trick it seems. Good dividend history and solid financials. The only one of the three companies to tick all 5 of my financial questions.
Decision: recommended a BUY. 👍

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So I end the review with 3 companies I'm recommending to buy. Great news I'm happy to invest. Now to decide where....