I like owning FTSE 100 shares that pay me dividends. I like it even more if those dividends grow. I like it so much more still if that growth lasts for decades.
There is a caveat though. Although I like shares with great dividend track records what I want to buy are ones I think have great dividend prospects – without overpaying for them.
UK Dividend Aristocrat
That brings me to one FTSE 100 share that has an incredible record of raising its dividend annually, for over half a century. That makes it what we call a Dividend Aristocrat. Not only that, but I reckon the business has great potential both now and in the future.
The firm in question is Spirax (LSE: SPX). Many people have not heard of this FTSE 100 member, perhaps because it is an industrial business that sells to other companies. But from a commercial perspective, I think there is a lot to like about the business model – and what it means for dividend potential.
Resilient demand, proven model
Over its long existence, Spirax has honed a business model that concentrates on some specific engineering needs customers may have. For example, although steam may seem like the technology of a bygone era, it currently has a wide variety of industrial applications.
By selling and servicing equipment that can help customers realise those applications and those of various industrial fluids, Spirax has found a very lucrative niche.
When a client’s machine stops working, business interruption costs can be substantial. That gives Spirax pricing power. It also means that demand can be strong even during an economic downturn.
I’d happily own this share
Things may not always go smoothly. For example, one risk I see is softness in demand in the Chinese market continuing – and perhaps spreading to other markets. That could hurt revenues and profits in coming years.
But I would be happy to own the share for the long term – if I could buy it at the right price.
Not yet a bargain
The Spirax share price has been falling. Indeed, the share now costs 36% less than it did at the beginning of the year. Over five years, the decline has been 22%.
But does that mean it is now good value? Not necessarily. Spirax is trading on a price-to-earnings ratio of 25. That still looks expensive to me. I do not feel it offers me a sufficient margin of safety as an investor, should Spirax‘s business performance be worse than I hope.
For that reason, I do not feel now is the time for me to buy the FTSE 100 share for my portfolio.
I continue to like the business model and the dividend prospects it provides. But the price to me is not attractive. So I will wait and watch, in the hope that at some point I may be able to buy Spirax shares at what I regard as an attractive valuation.
The post Is it time to buy this incredible FTSE dividend share? appeared first on The Motley Fool UK.
But there are other promising opportunities in the stock market right now. In fact, here are:
5 stocks for trying to build wealth after 50
The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.
Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
Claim your free copy now
More reading
This FTSE share with a stellar dividend record is now 34% cheaper to buy!
3 exceptional shares for a SIPP
Down 35% this year, is the worst-performing FTSE 100 stock of 2024 an unmissable bargain?
C Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
