This isn’t just a Covid-19 quirk. Measured over five years they are up 238% and 136% respectively. Both published results today, and both reported a further jump in profits. I think Antofagasta and Ferguson are two of the most exciting stocks on the FTSE 100, but as ever in life there is a catch.

You can probably guess what it is, too. After such barnstorming growth, these FTSE 100 stocks are looking a little expensive. So would I buy them today?

Both shares are recovery plays

Underlying full-year profits at Chile-focused copper miner Antofagasta jumped 12.3% last year to $5.12bn, on revenue growth of 3.3%. Sales volume fell, but copper and gold prices compensated by rising around 25%. Profits were further boosted by “the weaker Chilean peso, lower input costs and continued tight cost control”, management said. EBITDA margins increased from 49.1% in 2019 to 53.4%.

Antofagasta’s 2020 dividend totalled to 54.7 cents, up 22% on last year, easily beating analyst expectations. The 1.7% forward yield may look low compared to some FTSE 100 mining stocks, but it is covered 2.8 times earnings. Naturally, with all that share price growth, dividends have struggled to keep pace.

As with any metals or minerals commodity producer, Antofagasta relies on a booming economy to support demand. Many investors have been buying in anticipation of a strong post-pandemic recovery. Currently, it trades at 44 times earnings, but with a forward valuation of just 22 times. If the recovery disappoints, Antofagasta’s share price could go into reverse. 

I’m relatively optimistic about the wider recovery, but I think the Antofagasta share price has raced ahead of many FTSE 100 stocks, and I might watch and wait for now.

Ferguson, formerly known as Wolseley, is also benefiting from recovery hopes, particularly in the US, where the company mostly operates. 

These FTSE 100 stocks are flying

The group posted a 12.2% rise in underlying half-year trading profit. Revenue rose 4.2%, despite one fewer trading day. Management put this down to “excellent cost control”. It also hailed “good operating cash generation and [a] very strong balance sheet”. Ferguson still has an eye on growth, investing $224m in four first-half acquisitions. However, management dampened expectations by flagging up a “very uncertain” second-half outlook, amid supply chain pressures.

It also warned of “increasing supply chain pressures, transportation costs and the reversal of temporary cost reduction actions” during the first lockdown. So there are potential setbacks here, which could hit the share price hard because it is also expensive, trading at 21.8 times forward earnings.

Ferguson’s forward yield is 1.8%, covered 2.6 times. As with Antofagasta, rapid share price growth makes its dividends look less generous than they really are. This is still a top FTSE 100 income stock. Ferguson also treated shareholders to a $400m buyback, following the sale of Wolseley UK.

I like both FTSE 100 stocks, but marginally favour Ferguson. US President Biden’s $1.9trn stimulus splurge should give it a lift, along with the rest of the US economy. Let’s just hope that recovery arrives soon.

The post These 2 FTSE 100 stocks have thrashed the market but are they too expensive now? appeared first on The Twelfth Magpie.

More reading

• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

Harvey Jones 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.

We live in uncertain times, but history shows this is often the best time to invest in UK shares. If you wait until the post-Covid recovery is locked in, then you will have missed a great buying opportunity. Here are three FTSE 100 stocks I’d consider buying today. They should generate a rising, passive income to help fund my retirement over time.

Earn passive income in retirement

Shares in plumbing and heating products distributor Ferguson (LSE: FERG) are a play on the US recovery, because that’s where the company makes its money. This could be good news as President-elect Joe Biden pumps up the economy with yet more stimulus. The Federal Reserve looks set to remain dovish even when inflation picks up.

The Ferguson share price has climbed in a straight line since the March crash, more than doubling since then. Yet it still yields a decent 2.25%, beating many top UK shares. Last month it posted 12% growth in first-quarter trading profit to $504m, showing resilience. Ferguson is flush with cash after selling UK operation Wolseley for £308m, and looks set to reward shareholders with a special dividend. It does that from time to time.

The big UK supermarkets have emerged from the pandemic with improved reputations after keeping us fed and watered. The sector may struggle to deliver meaningful share price growth over the longer run, but Morrisons (LSE: MRW) makes up for that by paying attractive dividends. The FTSE 100 stock is now forecast to yield 3.9%, covered 1.9 times by earnings. While some UK shares have stopped payouts in the pandemic, this one hasn’t.

Today could be a good time for me to check out the Morrisons share price, as it trades at a relatively cheap 12.9 times earnings. It has been outpacing its rivals, too. Latest sales figures from Kantar show that December was the busiest month ever for British supermarkets. Morrisons led the charge, with sales up 13.1% over the 12-week period, beating next-placed Tesco, where sales rose 11.1%. 

I’d buy these UK shares for dividends

I particularly favour utility stocks for income. Water company United Utilities Group (LSE: PNN) doesn’t disappoint me, currently yielding 4.5%. Management showed its commitment to shareholders in November, hiking its dividend despite reporting a 16% fall in first-half underlying profit after tax to £174m.

This reflects new price controls, which all but guarantee a steady income stream. One worry is that bad customer debts may increase as the pandemic inflicts damage on incomes. Otherwise this stock offers security. The United Utilities share price is hardly overpriced, trading at 14.9 times earnings, making it cheaper than many UK shares.

Its current regulatory plan with Ofwat runs until 2025, so there are no regulatory concerns for several years. This looks like a solid way to build a passive income stream in the run up to me retirement and beyond.

The post £3k to invest in UK shares? I’d buy these 3 FTSE 100 stocks to earn passive income appeared first on The Twelfth Magpie.

More reading

• Could Andy Burnham derail these FTSE passive income stocks?

Harvey Jones 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.

The uncertainty could drag on for weeks, and may have to be settled in the US Supreme Court. Markets hate uncertainty, so this could hit FTSE 100 stocks, especially those with outsize exposure to the US. If share prices do fall sharply, I’d consider snapping up these two top dividend and growth companies.

Equipment rental company Ashtead Group (LSE: AHT) earns around 90% of its revenues through US subsidiary Sunbelt, and has benefited from the country’s lengthy bull run. Its stock has soared by 2,338% in that time, making it possibly the most rewarding FTSE 100 stocks of the decade.

If stock markets crash, buy shares

The Ashtead share price plunged during the first Covid-19 lockdown but has more than doubled since March. That’s why we at the Motley Fool urge investors to buy top companies in a stock market crash. You can make outsize profits when the initial panic passes.

While FTSE 100 stocks have held steady this morning, Ashtead is down nearly 3%, which may reflect current US uncertainties. I’ll be watching its share price like a hawk, because if the electoral troubles intensify, it could fall further.

Frankly, I’d buy Ashtead any time, given its healthy past performance and strong growth prospects. However, following recent strong growth it’s looked a tad expensive, trading at 17.33 times earnings. If US share prices crash and it gets cheaper, I’d fill my boots. 

My other FTSE 100 stock with hefty US exposure is plumbing and heating products distributor Ferguson (LSE: FERG), which also generates more than 90% of its revenues from across the pond. Ferguson has also done brilliantly over the last 10 years, rising 350%, with dividends on top. Like Ashtead, it has doubled since March.

I’d buy both these FTSE 100 stocks

The US stock market has easily outperformed the UK in recent years and, on the day before the election, stood at a two-year high. Every UK investor should have some exposure to the US, and it’s great that one can do this by investing in top FTSE 100 dividend and growth stocks like these two.

Like Ashtead, Ferguson is also relatively expensive today, trading at 20.98 times earnings. It has more than justified that valuation, but I’d still rather buy it at a reduced price, should we get a US stock market crash.

As far as these two companies are concerned, I don’t think it matters whether we get President Trump or President Biden. Both FTSE 100 stocks have excellent track records and should thrive, whoever’s in The White House. However, short-term political wrangling may present an opportunity to gain exposure at a reduced price. So that’s another reason to keep eyes glued to the US electoral results.

The post US election too close to call! I’d buy these 2 FTSE 100 stocks if stock markets crash appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Harvey Jones 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.

Dividend stocks should generate a rising income over time, as most companies endeavour to increase their payments year after year. Better still, it’s a passive income, which means you don’t have to do anything to earn it. FTSE 100 dividend stocks like these three could even help you retire early.

Pharmaceutical giant GlaxoSmithKline (LSE: GSK) has been a FTSE 100 dividend hero for years, and remains a top income stock today. While investors have been disappointed by management’s decision to freeze the payout at 80p a share for the last few years, it’s always seemed a sensible move to me. It allows the company to pump more money into its drugs pipeline, to build future revenues.

I’d buy this FTSE 100 dividend stock today

Investors can hardly complain, given the stock currently yields 5.47%. That’s a terrific income, especially with the base interest rate at 0.01%. It’ll look even better if we get negative rates. Cover is reasonable, at 1.5 times earnings.

Better still, the Glaxo share price is relatively cheap right now, trading at 11.62 times earnings. It has been drifting downwards lately, and trades around 12% lower than six months ago. This looks like one of the most compelling FTSE 100 dividend stocks today.

Most FTSE 100 dividend income investors will already have Glaxo on their radar, but some may have overlooked another top stock, fund manager Schroders (LSE: SDR). It currently yields 4.05%, and cover is better here at 1.7 times earnings.

Asset managers are often seen as a geared play on the stock market and, inevitably, the Schroders share price fell in the March crash. It has recovered strongly though and, in contrast to Glaxo, is up 12% in the last six months.

With global central bankers effectively backstopping share prices, the risk is greatly reduced. You can still buy it at a discounted valuation of 13.95 times earnings. Schroders has a great long-term pedigree, and looks like another tempting FTSE 100 dividend stock for those seeking rising passive income.

This rising passive income could be yours

Plumbing and heating products distributor Ferguson (LSE: FERG) is a play on the US economy, as it generates more than 90% of its revenues from the States. However, investors should not overlook its income capabilities as well.

Ferguson suspended its dividend earlier this year but has now restored its payout after trading picked up. Revenues fell by just 0.9% to $21.8bn in the year to 31 July, with pre-tax profit down 4.8% to $1.3bn. These figures look assuring given today’s uncertainties. 

This FTSE 100 dividend stock may only yield 2.6%, but the payout is handsomely covered 2.7 times, giving scope for progression. The Ferguson share price is more expensive, at 20.2 times earnings. Maybe start with Glaxo and Schroders, and keep Ferguson on your watch list.

The post I’d buy these 3 FTSE 100 dividend stocks to generate a rising passive income and retire early appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

Good sports

What makes this even more impressive is that JD operates in the embattled high street retail sector, which is floundering as shoppers head online. Its market-cap now stands at an impressive £7.66bn – the last time I looked at the stock, in mid-September, it was just £6.6bn, as the growth continues without pause. How has it succeeded where so many have come unstuck?

The obvious answer is by bringing in a lot of money – its recent set of interims showed six-month revenues up 47% to £2.72bn. This is down to its diversified product range, which embraces both sportswear and casual fashion, including tie-ups with key brands such as Nike and Adidas, and solid outdoor brands Blacks and Millets.

Run of success

JD doesn’t just operate in the UK, but is expanding across Europe, Asia-Pacific and the US, which gives it geographical diversification and plenty of scope for international growth. Better still, it can beat off the internet threat with a successful website operation of its own.

There’s a catch – the stock now trades at a pricey 23.7 times forward earnings, and those earnings look set to slow. Over the last three years, they have grown by 58%, 55%, and 13%. This year looks flat, City analysts reckon, and although it will quickly return to growth, this will be at a slower pace, 16% in 2020 and 12% in 2021.

Given the high valuation, any disappointments could weigh on the JD share price. This remains a difficult stock to bet against though, and with that proviso I’ll still call it a buy.

This stock’s plugged in too

Everything is relative. Normally, I’d be raving about fellow FTSE 100 stock Ferguson (LSE: FERG), whose share price has soared 101% in five years, but that growth looks positively sluggish when set alongside JD Sports Fashion.

Don’t let that put you off, the multinational plumbing and heating products distributor has a strong track record of share price and dividend growth. The £15.6bn group generates 92% of its trading profits from the US, with the remaining 8% split evenly between the UK and Canada, giving you direct exposure to the US economy, but with a London listing.

The Ferguson share price has continued to climb this year, helped by the Fed’s recent interest rate cuts, which should maintain US growth and support its property market, which drives demand for Ferguson’s products.

The stock currently trades at 15.8 times forward earnings, which isn’t particularly demanding, especially since it has delivered healthy double-digit earnings per share growth over the last three years.

Those earnings also look set to slow, but otherwise the stock looks solid for now, and its forecast yield of 2.6% is nicely covered 2.5 times, which holds out the promise of more progression on that front.

The post These 2 FTSE 100 stocks are up 750% and 100% over five years, and I’d buy them both appeared first on The Twelfth Magpie.

More reading

• Still stubbornly in pennies, will the JD Sports share price hit £1 again?
• Your ISA allowance is waiting! 3 dirt-cheap stocks to consider right now
• See what £12,000 in explosive JD Sports shares 1 month ago is worth today
• 2 FTSE 100 bargain stocks to buy in June?

Harvey Jones 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.

It’s not the only top income grower that I’ve got my eye on, though. Ferguson (LSE: FERG) is one from the FTSE 100 I reckon could make investors delicious returns in the years ahead. Why? The terrific progress it’s making in its core US territory, even during difficult trading conditions.

According to fresh quarterlies, Ferguson — which provides plumbing and heating products around the globe — still delivered a 2.7% improvement in group organic revenues despite the impact of a slowing Stateside economy.

Riding out the storm

There’s no doubt the business is suffering from tougher conditions in the US, a territory from where is sources around 85% of total revenues. The Footsie firm commented that “overall market environment has moderated to low growth” and this was reflected in organic sales growth in the region slipping to 3.3% between January and April. This was quite the departure from growth of almost 10% in the prior six months.

Things are not ideal, clearly, though I’d argue its ability to generate any sort of sales growth in quarter three, given the toughness of market conditions in recent times and the immense comparatives of a year earlier, is something that’s to be commended.

Indeed, the business saw trading profit in the States rise 3.6% in the last quarter, and 2.5% at group level, to £359m. Ferguson’s able to stay afloat by grabbing market share from its rivals, and the margin boost which rampant cost-cutting is delivering (group gross margins rose to 29.5% as of April, from 29.3% three months earlier).

I’m sure that many of you remain unconvinced, however. This is why I’d like to highlight recent evidence which shows a rapid improvement in Ferguson’s market conditions. According to the Commerce Department, new home sales in the US rebounded 7% year-on-year, on a seasonally-adjusted basis, to 646,000 units in June. Too early to claim the market has bottomed, sure, but a robust jobs market and the prospect of low interest rates getting still-lower gives hope of ever-improving conditions for the company as we move into 2020.

Dividends heating up

Truth be told, even given its current troubles, Ferguson remains in great shape to keep its ultra-progressive dividend policy in business. Net debt to EBITDA remains at just 0.9 times, well below the company’s targeted limit of 2 times. And this gives it plenty of headroom to keep rewarding its shareholders generously.

This is why City analysts expect the plumbing giant, which hiked the full-year dividend 21% for the fiscal year ending July 2018 to 189.3 US cents per share, to lift it to 207.8 cents in the year that’s about to expire, and again to 223.2 cents in fiscal 2020. The company’s decision to launch a $500m share buyback programme last month has certainly done broker hopes of increasingly-large dividends no harm.

Trading might be tricky right now, though I reckon Ferguson should still deliver handsome returns to its shareholders for many years to come, given its rising might in the world’s biggest economy. I’d happily buy it today to boost my pension pot.

The post A FTSE 100 dividend stock I think could help you retire in luxury appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Royston Wild owns shares of Ibstock. The Motley Fool UK has recommended Ibstock. 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.

As such, investing in FTSE 100 stocks that have solid track records of dividend growth could be a shrewd move. They may offer scope for a high income return, as well as the potential for capital growth. With that in mind, here are two large-cap shares that could become increasingly appealing income opportunities over the long run.

Compass Group

Over the last four years, support services company Compass Group (LSE: CPG) has increased dividends per share by over 9% per annum. It has been able to do so due to its consistently-rising bottom line, with the company’s strategy focused on generating efficiencies and simplification. As part of this, it has made disposals while also engaging in acquisitions. This could provide it with a stronger growth opportunity in the long run.

Since Compass Group’s dividend payout is currently covered 2.1 times by net profit, it seems to be highly affordable. Therefore, the company may be able to increase dividends at a similar pace to profit growth without hurting its financial position over the medium term.

With the company’s bottom line due to rise by 9% in the current year, its potential to become an increasingly appealing income share remains high. Therefore, despite a dividend yield of just 2.1%, it could be a worthwhile income investing purchase.

Ferguson

Plumbing and heating specialist Ferguson (LSE: FERG) continues to reap the benefits of a rapidly-growing US economy. In its most recent quarter, the firm recorded a rise in ongoing revenue of 8.4% in the US. It has also been able to improve gross margin, while maintaining its strong financial position. This should provide it with scope to make further acquisitions that could improve its long-term growth outlook.

Over the last four years, Ferguson has increased dividends per share at an annualised rate of around 15%. Despite such a rapid rate of growth, its shareholder payouts are currently covered 2.8 times by profit. Alongside its improving financial prospects, this suggests dividends could increase at a rapid rate over a sustained period of time – especially with its relatively strong cash flow.

While the stock may have a dividend yield of just 2.4% at the present time, its shareholder payouts could be relatively high over the long run due to their growth potential. As such, with the US economy forecast to continue its strong growth rate, now could be the right time to buy a slice of the business from both an income and growth perspective.

The post Forget buy-to-let! I’d buy these 2 FTSE 100 dividend growth stocks in an ISA today appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. 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.

Heading Stateside

This has hit top FTSE 100 companies with major exposure to the States, such as Ashtead Group (LSE: AHT) and Ferguson (LSE: FERG), both of whom generate the vast majority of their profits from the world’s largest economy.

Both struggled over the last year, their share prices falling 17% and 5% respectively, but that could be about to change. After six interest rate rises since 2015, markets are penciling in an 80% chance of a Fed interest rate cut in July, and maybe one or two more before the year is out.

On the rebound

This could drive US markets back up, particularly if Trump follows through on Twitter pledges to hold “an extended meeting” with Chinese president Xi Jinping at next week’s crucial G20 summit in Japan.

Markets are already surging in anticipation of these two events and this could signal brighter times ahead for Ashtead and Ferguson.

Equipment rental supplier Ashtead could do with a construction boom, although it’s doing well without one. It reported pre-tax profits up 17% to £1.22bn earlier this month, as it grows by snapping up smaller rivals and adding them to its Sunbelt brand.

Buy backs

Ashtead also increased its full-year dividend to 40p, up 21% from last year’s 33p. It should further reward shareholders with a £500m shares buyback. A slight concern is net debt, which grew from £2.71bn to £3.75bn over the year, largely due to acquisitions.

The Ashtead share price isn’t cheap, trading at 17.28 times earnings. And with US construction slowing, it needs the added boost of lower borrowing costs and the lifting of trade war concerns. Will it get them? We may find out soon.

Cashing in

Plumbing supplier Ferguson also announced a generous share buyback offer this month, this time of $500m, in its quarterly results to 30 April. These showed ongoing revenue up 6.2% overall to £5.27bn, with disappointing UK growth boosted by a better ongoing US performance at 8.4%. That’s handy, given that it generates around 80% of its earnings from the States. Ongoing trading profit of $359m was $8m ahead of last year, while it generated $632m of operating cash in the quarter.

Ferguson stock has delivered an annualised rise in dividends per share of 15% in the last four years, which compensates for a relatively low current yield of 2.58%.

Blame Canada

The Ferguson share price now trades at just 14 times forward earnings. But there are potential clouds on the horizon, notably in Canada, where the property market is slowing due to tighter laws on mortgage lending.

After years of strong earnings growth, analysts have been alerting investors to data suggesting the US housing market is also weakening. Against that, you have to set the prospect of cheaper interest rates and a trade deal boost, which could turn things round.

If you want exposure to a resurgent US economy, Ashtead and Ferguson could be worth a look.

The post Why I’d buy these 2 FTSE 100 growth stocks if US interest rates fall appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Harvey Jones 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.

Furthermore, many large-cap shares appear to offer wide margins of safety. As such, now could be a good time to build a portfolio of FTSE 100 stocks, with these two companies worth buying today in my opinion.

Ferguson

Plumbing and heating specialist Ferguson (LSE: FERG) released a quarterly trading update on Monday, which showed that it continued to make progress during the period. Ongoing revenue increased by 6.2% to $5.27bn, with growth in the US being 8.4%. Its trading profit increased by 2.3% to $359m, with good cost control helping margins to rise slightly versus the same period of the previous year.

With a continued focus on customer service and investment in its core operations, the company seems to be well-placed to generate further growth over the medium term.

Although Ferguson has a dividend yield of just 3% at the present time, it has a good track record of dividend growth. For example, in the last four years it has delivered an annualised rise in dividends per share of 15%. Since shareholder payouts are currently covered 2.8 times by net profit, there seems to be further scope to raise dividends in future. With the company performing well from a business perspective, it could also generate impressive share price growth.

British American Tobacco

The ongoing changes within the tobacco industry are causing investors to shun British American Tobacco (LSE: BATS). The transition of smokers from tobacco products to less harmful alternatives such as e-cigarettes means that the industry may be less robust and resilient than it has been in previous years. However, it may also mean that there are growth opportunities ahead.

Since British American Tobacco has invested heavily in reduced-risk products, it appears to have a solid position in what is proving to be a fast-growing market. This could drive profitability higher, while the robust cash flow from tobacco could fund next-generation products, as well as dividend growth, over the medium term.

With dividends per share having grown at an annualised rate of 7% in the last four years, the company has a solid track record of rewarding its shareholders. Since it is due to post a rise in earnings of 9% this year, further dividend growth could be ahead. This could make its dividend yield of 7% even more appealing, while a price-to-earnings (P/E) ratio of 9.5 suggests that a wide margin of safety is on offer.

Therefore, for contrarian investors who are content to take a long-term outlook in return for improving income prospects, the company could be highly appealing.

The post Forget a Cash ISA! I’d buy these 2 dirt-cheap FTSE 100 dividend growth stocks today appeared first on The Twelfth Magpie.

More reading

• Double a state pension thanks to dividend shares? Here’s how it could be done
• How much second income am I aiming for with £20,000 in this superb FTSE 100 dividend star?
• In the event of a stock market crash, is this one of the best stocks to consider buying?
• Here’s how much you’d need to invest in 5%-yielding dividend shares for £2,000 a year of passive income
• 3 strategies to try and earn money from a Stocks and Shares ISA

Peter Stephens owns shares of British American Tobacco. 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.

With that in mind, here are two FTSE 100 stocks that may not have the highest yields in the index at the present time, but that could offer rapidly-rising dividends in the long run. As such, now could be the right time to buy them.

Unilever

Unilever (LSE: ULVR) continues to offer an impressive long-term growth outlook. Certainly, there are continued concerns about the strength of China’s retail sales prospects – especially at a time when fears surrounding a global trade war are exacerbated. However, with the stock having a diverse geographic spread, it may be able to overcome risks in some regions by delivering growth elsewhere.

In terms of its dividend yield, Unilever currently offers an income return of 3.1%. That’s around 1.2% lower than the FTSE 100’s yield, which may lead to some investors being lukewarm about its income investing prospects. However, the company has a strong track record of dividend growth.

In the last three years, for example, dividends per share have risen at an annualised rate of over 15%. Since dividend payouts are currently covered 1.6 times by profit, there could be scope for further dividend increases in the long run.

Although Unilever’s price-to-earnings (P/E) ratio of 20.7 is relatively high, it has been significantly higher in the past. Therefore, the stock could offer improving total return potential, as well as lower risk due to its diverse range of products and geographic exposure.

Ferguson

Although there are continued fears about the prospects for the US housing market, plumbing business Ferguson (LSE: FERG) continues to have a bright financial outlook. In the current year, for example, the company is expected to post a rise in earnings of 21%. This puts it on a price-to-earnings growth (PEG) ratio of just 0.8, which suggests that it could deliver impressive capital growth in the long run.

Ferguson’s income investing prospects may also be highly appealing. The company currently has a dividend yield of just 2.6%, but this is covered 2.8 times by profit. This suggests that there could be a rapid rate of dividend growth in the coming years that would not put the company in a difficult financial position. Since dividends per share have increased at an annualised rate of 14.6% during the last four years, the company has a good track record of raising shareholder payouts.

Therefore, while Ferguson may lack a high income return today, its dividend growth prospects could make it an enticing income stock in the long run. With capital growth potential also on offer, its total returns could be highly impressive.

The post 2 cheap FTSE 100 dividend growth stocks I’d buy in a Stocks and Shares ISA today appeared first on The Twelfth Magpie.

More reading

• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• 2 FTSE shares for beginners starting an ISA
• Is this former stock market hero now the ultimate FTSE 100 buy and hold?

Peter Stephens owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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.