The Bunzl (LSE:BNZL) share price has risen by a whopping 88% over the past decade. And while it’s down since the start of 2024, the company is staging a comeback as sales and margins show signs of recovery.
I’m looking for the best passive income shares to buy in July. And Bunzl — with its 31 straight years of dividend growth — is near the top of my shopping list.
Created with TradingView
In fact, following an excellent trading statement today (27 June), I may finally be about to pull the trigger. Here’s why.
A stable performer
Support services giant Bunzl sells a wide range of essential products to a variety of sectors across the globe. This includes food packaging to supermarkets, disinfectant to cleaning businesses, gloves to medical professionals, and hard hards to construction companies.
Put simply, its provision of everyday goods and services helps the world go round. As a result, earnings tend to be stable at all points of the economic cycle, which in turn gives Bunzl the strength and the confidence to deliver that long-term dividend growth I mentioned above.
Profit upgrade
But the company hasn’t had it all its own way more recently. Weak trading in North America has impacted revenues and margins, and this remains a threat if interest rates fail to meaningfully backtrack from current levels.
Bunzl confirmed today that sales are likely to have dipped 3% to 4% in the first half, or 0% to 1% at stable currencies. It said that “volume reductions and deflation in our US business” will likely drive revenues lower.
However, a sharp uptick in operating margins is helping to offset this problem. Indeed, Bunzl said margins are now expected to beat 2023’s levels, which in turn prompted the firm to raise its earnings forecasts for the full year.
It said that effective margin management and the benefit of acquisitions mean that “good margin growth is expected in North America in the first half of the year and very strong margin growth in the UK & Ireland and Rest of the World.”
Bunzl also said it now expects to announce “robust revenue growth” at constant currencies for the full year.
Dividend growth
Year
Dividend per share
Dividend growth
Dividend yield
2023
68.3p
+ 8.9%
2.2%
2024
72p (f)
+ 5.4%
2.3%
2025
76p (f)
+ 5.6%
2.5%
2026
79.3p (f)
+ 4.3%
2.6%
So what dooes this update mean for future dividends? Well, City analysts were expecting payouts to continue rising before Thursday’s update, as shown in the table above. Today’s news is sure to reinforce their bullish estimates.
On the downside, brokers think dividends will grow at a more modest rate than in previous years. The payouts on Bunzl shares have risen at a compound rate of around 9% since 1992.
Nonetheless, dividend growth is expected to outpace that of the broader FTSE 100. For instance, AJ Bell projects a modest 2.3% rise in cash rewards (including special dividends) for 2024. This is less than half the growth rate brokers anticipate for Bunzl’s dividends this year.
And if the business can keep its recent momentum going, analysts might actually upgrade their dividend forecasts for the short-to-medium term. I think dividend chasers should give Bunzl shares a close look right now.
The post Bunzl’s share price rises on profit upgrade! Time to buy for passive income? appeared first on The Motley Fool UK.
Should you buy Bunzl Plc now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
What are the best UK shares to buy now?
3 world-class FTSE 100 dividend shares I’d consider buying for lasting passive income
5 Dividend Aristocrats in the UK that Fools love
Revealed! One of the FTSE 100’s greatest passive income stocks
2 top growth stocks to consider buying in June
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc and Bunzl Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.