Two of the best performers of recent years are defying the downturn and have continued to grow over the last month. Now could be a good time to check out the Hikma Pharmaceuticals (LSE: HIK) and Rentokil Initial (LSE: RTO) share prices, which are staying afloat, as almost every other company sinks along with the market.

Pharmaceutical stocks tend to hold their own when stock markets are falling, because people continue to fall ill in a recession, often more than before. 

Hikma Pharmaceuticals

This is particularly true now, as markets fall due to the coronavirus global health scare. Hikma stock is up around 5% over the last week, at time of writing. Over two years, it’s up 124%.

Hikma was given a timely lift by a positive set of preliminaries last week, which showed group core revenue up 6%, with group operating profit surging 33% to $493m. It also strengthened its balance sheet by trimming net debt to $242m, while raising his full-year dividend more than 15% to 44 cents per share.

Many investors overlook Hikma as they target pharma big guns AstraZeneca and GlaxoSmithKline. But this £4.72bn stock has huge growth potential, launching 108 new products across all its global markets last year, and signing 18 licensing agreements for the US and MENA. Its flowing pipeline should help drive future revenues.

Hikma shares should also benefit from its recent blockbuster agreement with Glenmark Pharmaceuticals. Some pharmaceutical stocks have soared on speculation about developing new coronavirus treatments, leaving them overbought.

But that isn’t the driver here. Hikma is just a very good company on a roll. Yet it trades at a modest valuation of 14.5 times forward earnings, while its 1.8% yield is covered 3.7 times by earnings, giving plenty of scope for growth. I’d buy it for the long-term.

Rentokil Initial

Rentokil Initial is also up around 5% over the past week, and a bumper 100% over two years, during which time the FTSE 100 as a whole actually fell 7.5%.

The £9.59bn group is a direct beneficiary of current worries because, along with its renowned pest control services, it also supplies hand washing and hand sanitising services. Again though, this is far from a pure coronavirus play. Last week, the Rentokil share price flew as it posted a 10% increase in adjusted pre-tax profits to £341m, with organic revenue growth of 4% — its highest level in 15 years.

This is a global business, and is performing strongly in its Pacific business region, as countries urbanise and pest control becomes more important, as well as in the UK and Europe.

The big concern is that, after recent share price success, Rentokil stock looks pricey. It trades at 31.8 times forecast earnings, while the yield is relatively low at 1.4%, despite progressive management that recently hiked payouts by 15.2%.

I’d prefer a more reasonable valuation, but this stock is in demand right now.

The post These 2 FTSE 100 growth stocks I like are climbing while markets crash appeared first on The Twelfth Magpie.

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

One of the best dividend growth companies in the FTSE 100, in my opinion, is Intertek (LSE: ITRK). Its business of quality assurance testing might not be the most exciting, but it’s an essential one, and it’s one where reputation counts for everything.

Essential testing

Companies are willing to pay for quality as long as they know they’re going to get the best results. It’s just not worth skimping on price for a lower quality test only for the product to then break when it gets to the consumer.

Through a combination of organic growth and bolt-on acquisitions, Intertek’s sales and earnings have grown at a compound annual rate of 5.1% and 10% per annum, respectively, since 2013. This growth has allowed the company to pursue an effective progressive dividend policy.

The payout has risen at a compound annual rate of 16% since 2013 and today, the stock supports a dividend yield of 2%. That might not seem like much, but the distribution is covered twice by earnings per share. As Intertek’s bottom line continues to expand, I see no reason why the payout cannot continue to grow at a double-digit growth every year for the foreseeable future. 

Booming growth

Another defensive dividend stock I think is worth your research time is private healthcare provider NMC Health (LSE: NMC). Once again, with a dividend yield of only 1% at the time of writing, this stock is hardly going to win any awards for yield. However, it’s the company’s dividend growth that I’m interested in.

As net profit has jumped four-fold over the past six years, NMC’s distribution to investors has grown from $0.04 per annum to $0.29 (projected for 2019). That’s a compound annual growth rate of 33%.

City analysts are forecasting earnings growth of more than 25% for the next two years, which should give the company plenty of financial flexibility for further dividend increases in the years ahead.

On top of this, the payout is covered more than five times by earnings per share. This implies earnings could drop by more than 50% and NMC would still have enough money coming in to afford its dividend — that’s what I call a secure income stream. 

You dirty rat

If NMC’s earnings are rising off the back of increasing demand for healthcare, FTSE 100 business Rentokil (LSE: RTO) is benefiting from the world’s growing rodent population. 

Urbanisation and rising global temperatures have led to an explosion in rodent infestations, and Rentokil is the first company many people call when they have a problem. 

OK, that’s not strictly true, as the company operates under a range of different brands, so customers don’t call Rentokil directly, they call their local branch. This approach has worked well for the business. By buying up local operators, it has been able to grow swiftly and maintain the goodwill these firms have built with their customers over the years. 

As the company has consolidated the global market for pest control, investors have reaped the rewards. Rentokil’s dividend per share has increased by 14% per annum, on average, since 2013. I see no reason why this trend cannot continue. The payout is covered nearly three times by earnings per share, leaving plenty of headroom for growth in the years ahead.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended NMC Health. The Motley Fool UK has recommended Intertek. 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.

Smiths shines

The books, stationery, magazines, newspapers, gifts and toys retailer has been a winner for investors lately, with the stock up 98% over five years. That’s good going for a high street and railway station fixture that many investors may view as fusty and unglamorous.

Today’s preliminaries for the year to 31 August showed group revenue up 11%, albeit just 1% up on a like-for-like basis, while its Travel division did particularly well with total revenue jumping 22%. That falls to 8% once you exclude the recent InMotion acquisition, and 3% on a like-for-like basis.

WH Smith has just won its first stores in a major US airport, and now boasts a record number of international units, 433 at the end of August. It operates across 30 countries and over 100 airports, with “significant wins” recently across Europe, the Middle East and Australia. High street profits of £60m were the same as last year, but up £2m in the second half.

It’s good to travel

Group CEO Stephen Clarke, who exits at the end of this month, is pleased with the progress despite “uncertainty in the broader economic and political environment,“ and said the group will continue to focus on profitable growth, cash generation, and delivering value for shareholders.

It also announced a proposed 8% increase in the final dividend, which Clarke said reflects the group’s cash generation and confidence.

My only concern is that the £2.4bn FTSE 250 group isn’t cheap, trading at 18.2 times forward earnings. But its prospects remain strong, with analysts expecting earnings to rise 10% next year. The yield is 2.8%, covered exactly twice, but the payout has risen regularly.

What I particularly like is it offers further growth prospects as it spreads its wings internationally, while its travel business makes it more than just a magazine stockist. Management has also completed a £31m share buyback. Definitely one to watch and, maybe, even buy.

Rentokil cleans up

FTSE 100 listed Rentokil Initial (LSE: RTO) is also in investors’ good books today, up around 2% after its Q3 trading update hailed “another strong quarter.” Ongoing organic revenue growth of 5.5% is also its best in more than 10 years.

Revenues from pest control look particularly healthy, up 12.3%, or 5.9% on an organic basis, with its North American, UK & Rest of World, and Latin American operations doing well. Its global reach helps to make it Brexit proof.

Rentokil is acquisition hungry, ​buying 15 businesses in the quarter, with annualised revenues of around £15m. Loyal investors have been well rewarded, with the share price soaring by 292% over the past five years, and almost 45% this year alone. It’s absolutely thumped the FTSE 100, whose comparative figures stand at 13% and 1.8%, respectively.

Unfortunately, all this growth comes with a price tag. The £8.3bn group now trades at a whopping 31.7 times forecast earnings, while the yield is just 1.1%, although nicely covered 2.8 times. Rentokil needs to keep powering ahead, to justify its valuation. That may explain the relatively cool response to today’s numbers.

The post These 2 growth stocks have thrashed the index but there’s one thing that worries me appeared first on The Twelfth Magpie.

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

Today, I’m looking at two businesses which, thanks to their line of work, should be able to keep growing whatever the economic weather. The question is whether they’re worth buying at their current prices.

Killer growth

If all investment decisions were based on how exciting or attractive the companies were, Rentokil Initial (LSE: FLTA) would be unlikely to feature on many investors’ watchlists. The FTSE 100 giant is the world leader in pest control — about as far removed as you can get from a sexy tech stock. 

Despite this, Rentokil’s shares have been on a tear over the last 12 months, rising over 45% following some very positive trading. Despite operations in the US being impacted by poor weather during Q2, for example, July’s interim results showed a 4.2% rise in organic revenue — the company’s highest growth rate in H1 for over 10 years. 

The comforting thing about Rentokil’s line of work, of course, is that pests continue to thrive in good times and bad. The fact that it already operates in over 70 countries (and continues to acquire smaller rivals at a fair clip) should also help to mitigate any impact of Brexit. 

As mentioned above, however, adding this company to your holdings won’t be cheap. Rentokil’s shares currently trade on almost 33 times earnings. Even the most bullish market participants would say that’s expensive for any stock, especially as there are plenty of other companies operating in non-cyclical industries available for much less. 

For now, I’d be tempted to see what happens when a third-quarter trading update lands on 17 October. Should a wave of profit-taking follow, the valuation could become a little more attractive.

Dirty profits

Small-cap Filta Group (LSE: FLTA) could also be worth looking at even though, once again, it’s not cheap to buy.

The company specialises in the unglamorous business of removing fat, oil, and grease from commercial kitchens. This month’s interim results, however, were far from unpleasant.

Revenues rocketed 86% to £12.2m over the first six months of 2019 with £4.2m of this coming from its acquisition of peer Watbio. Adjusted pre-tax profit rose a healthy 14% to £1.3m. 

Elsewhere, a forecast yield of 1.5% might generate guffaws from those investing for income, but it’s worth highlighting that the interim dividend was increased by 39% from the previous year to 1p per share. As we never tire of saying at the Fool UK, fast-growing dividends are indicative of healthy businesses and, for this reason, are often preferable to sky-high yields that prove unsustainable. 

Filta is also doing its best to expand in markets other than the UK with “steady growth” in franchise numbers reported in North America and Europe. According to CEO Jason Sayers, the fact that its services are only being used “by 2% or less of the available markets in each geography” gives the company a lot of ‘white space’ to target. Increased regulation relating to hygiene should also act as a tailwind.  

Like Rentokil, Filta’s valuation is high at 37 times forecast earnings. Nevertheless, a price-to-earnings-growth (PEG) ratio of below 1 suggests investors should still get a lot of bang for their buck. 

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Paul Summers 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.

However, since I last covered the business, the stock has risen by around 15%, excluding dividends and, after these gains, I think it could be time to take profits.

Too expensive 

In my opinion, Rentokil now appears costly relative to its projected growth. Its shares are currently dealing at a forward P/E of 25.6. Even though earnings per share are expected to increase by 83% this year, that still gives a premium PEG ratio of 2.6 — a ratio below one implies the shares offer growth at a reasonable price. 

At this valuation, if the company misses City expectations, the shares could lurch lower, which would be a disappointing result for investors. However, it would also allow investors who have been sitting on the sidelines to buy in at an attractive valuation. 

And that’s what I think holders should do today. While I believe shares in Rentokil are overvalued, I’m still optimistic about the outlook for the group as there will always be a demand for pest control services around the world, and Rentokil is one of the best in the business. However, I don’t think it’s worth paying such a premium for the shares. It will be better, in my opinion, to sell up and buy back in at a more attractive valuation. 

A better buy

If you want to sell Rentokil and buy into another FTSE 100 growth stock, I recommend Coca Cola HBC (LSE: CCH). This company immediately stands out to me as a better buy because the shares are cheaper.

The stock is trading at a forward P/E of 20.3, which may look expensive compared to the rest of the market, but it’s in line with the rest of the UK beverage industry average (shares in Rentokil are valued at double the sector average, by comparison). Also, this Coca-Cola bottler supports a more attractive dividend yield of 2.2%, compared to Rentokil’s 1.3%. 

Further, according to my research, Coca Cola HBC is more predictable as a business than its smaller FTSE 100 peer. The company’s operating profit margin has increased from 5.4% to 9.6% over the past six years, rising steadily every year. Meanwhile, Rentokil reported an operating profit margin of 10.7% in 2016 and then 30.7% in 2017 before it fell back to -3.9% in 2018.

Balance sheet strength  

Coca Cola HBC also has a much stronger balance sheet because the business doesn’t rely on acquisitions as much as Rentokil. Based on last year’s figures, the company’s net debt, as a percentage of shareholder equity, was less than 20%, compared to Rentokil’s 136%.

So this suggests Coca Cola HBC is more predictable as a business, has a stronger balance sheet and the shares are cheaper. In my opinion, all of these factors mean the company is a better investment than Rentokil, especially considering the latter’s premium to the rest of its sector and the broader market.

The post One FTSE 100 growth stock I’d buy today, and one I’d sell appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

Away from home

A disorderly Brexit might throw the UK economy into turmoil, but no matter how widespread the fallout, FTSE 100 member Rentokil Initial (LSE: RTO) is unlikely to see a significant drop off in business.

Specialising in pest control and hygiene products, Rentokil is, in my opinion, one of the FTSE 100’s most defensive stocks. Rodents don’t take time off — no matter how poorly the rest of the economy is faring.

What’s more, only around 10% of the company’s revenue comes from the UK. The firm also has operations in North America, Europe, Asia and the Pacific region. It’s been growing steadily in these regions by acquiring smaller businesses that offer good growth potential, using a mix of cash flow from operations and debt, buying from owner-operators, and then using its experience to reduce costs and improve sales.

So far, this strategy has been highly effective. Net profit has jumped four-fold over the past five years, and the dividend has increased by more than 100%. 

As long as the business doesn’t overstretch itself, I see no reason why this trend cannot continue. There’s still plenty of smaller operators out there to merge into the larger group, which should support revenue growth for many years to come. Indeed, the company acquired 16 new bolt-on businesses in the third quarter alone.

Granted, shares in Rentokil aren’t cheap — they’re currently changing hands for 22.5 times forward earnings — but considering the group’s future potential and international diversification, I reckon the stock deserves this premium multiple.

Focus on emerging markets

Rodents don’t take off, and neither does commodities trader Glencore (LSE: GLEN). No matter what happens to the UK after Brexit, this business, which also has operations around the world, is unlikely to see any significant impact on its performance.

Glencore is a unique business in the commodities world. It’s the world’s largest trader of commodities, such as grain and oil, but it’s also a significant producer of commodities, such as coal, copper, nickel and cobalt. The last two of these are vital components in the battery packs of electric vehicles, which will act as a hedge against falling demand for coal. 

Glencore doesn’t expect the demand for coal to tail off anytime soon, either. In a recent presentation, the company told investors an extra 1bn tonnes of coal fired-power capacity was currently under construction around the world, underpinning demand for as much as 250m in additional coal production over next five years.

With the UK committed to phasing out dirty fuels such as coal, it’s difficult to think of this as a growth business for Glencore, but that’s what management seems to believe. It also means the company is highly insulated from Brexit fallout. A dividend yield of 5.9% only sweetens the attraction, in my opinion.

Glencore might not be everyone’s cup of tea, but this global commodities trader is, in my view, one of the most Brexit-proof stocks in the FTSE 100.

The post Alert: Time could be running out to buy these Brexit-proof FTSE 100 stocks appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

I’m impressed by the firm’s record of growing its revenue, earnings and operating cash flow. Over six years, the dividend has risen more than 100%, which I think is a good litmus test of how effective the firm’s growth strategy is as it expands around the world. Roughly 90% of revenue comes from outside the UK with the firm operating in North America, Europe, Asia and the Pacific region, as well as in Britain.

Consolidating a fragmented industry

The core driver of growth is the pest control operation, and the company sees itself as a consolidator in the sector as it thrusts into new territories across the globe. The industry is fragmented, according to the directors, which gives the firm the opportunity to grow by acquiring smaller businesses in areas that offer good growth potential. However, the company also enjoys leading positions in the hygiene services and interior landscaping sectors and states that its business model for profitable growth focuses on “compounding revenue, profit and cash growth through organic growth and M&A (mergers and acquisitions).” 

Today’s third-quarter trading update reveals that continuing revenue at constant currency exchange rates rose almost 12% compared to the equivalent period last year. Just over 4% came from organic growth and the rest from acquisitions. I don’t think I’ve come across a FTSE 100 firm that is as focused on its acquisition programme as Rentokil Initial appears to be. The company acquired 16 new bolt-on businesses in the period, 14 in its Pest Control division, one in the Hygiene division and one in Ambius, its interior landscaping division. Most of the takeovers were in emerging and growth markets.

A strong pipeline

To put the acquisition programme in perspective, the combined annualised revenues of all of the businesses acquired so far in 2018 in the year before Rentokil Initial bought them comes to just over £156m.  That compares to Rentokil Initial’s 2017 turnover of a little over £2.4bn, so the strategy doesn’t expose the firm to big risks. The purchases are small businesses, typically the best-run of several competing firms in an attractive market. Rentokil swoops in, makes an offer, and after it has been accepted applies all its know-how to expand from its initial toe-hold in the new market, which is typically in a fast-growing city somewhere in the world.

The company said in the report that “the M&A pipeline going into Q4 and 2019 remains strong.” And chief executive Andy Ransome said the company is “on track to meet expectations for the full year.”  City analysts following the firm have pencilled in a rise of around 5% in earnings this year and 11% in 2019, so we can expect more steady progress ahead. The shares are not cheap. Today’s share price throws up a forward price-to-earnings ratio close to 22 for 2019, but the business is executing its growth strategy well in a market with a tailwind. I think it deserves its rating and is a good candidate for a long-term hold in my portfolio.  

The post I’d buy this growing FTSE 100 stock in this market weakness appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

One such firm that’s done particularly well for loyal holders has been global pest control firm Rentokil Initial (LSE: RTO). Had you purchased the stock three years ago, the value of your capital would have more than doubled by now.

This is not to say that the company still can’t make money for new investors. Today’s trading update was, after all, reassuringly issue-free.

Ongoing revenue moved 11.8% higher in Q3 to £637.4m with just over a third of this being generated organically and the remainder coming from acquisitions.

Revenue from pest control increased 11.4% thanks to good performance in both growth and emerging markets. Decent weather in Europe and the UK did the company’s top line no harm while ongoing revenue also increased by 12.1% in the US. Elsewhere, revenues from the firm’s Hygiene division (Initial) rose by 22% over Q3.  

I’d be surprised if this kind of growth trajectory ended any time soon, especially given the number of deals recently sealed. The £5.8bn cap purchased 16 other businesses over the quarter bringing the total number of acquisitions to 39 so far in 2018. With plenty more targets in its sights for Q4, one can only guess at what the final number for the year will be.        

After initially climbing in early trading, Rentokil’s share price was flat by mid-morning. This is perhaps to be expected for a company that’s already trading on almost 25 times forecast earnings, reducing to 22 next year assuming earnings estimates are hit and the share price doesn’t budge.

Nevertheless, should you be looking for a steady, reliable growth play to hold for the long term, I continue to believe that it more than fits the bill. And while dividends are still very low — the 4.75p per share expected next year equates to a yield of just 1.5% at the current share price — levels of free cash flow continue to rise, suggesting that the company should continue the trend of double-digit hikes to the payout going forward.

Another winner

Like Rentokil Initial, global metrology and healthcare firm Renishaw (LSE: RSW) has been a great performer, more than doubling in value over the last three years (and that’s after taking into account the recent slide in its share price). Renishaw also revealed an update on trading this morning. 

At £154m, total revenue was 7% higher at constant currency in the three months to the end of September compared to the same period last year. Predictably, the metrology division continues to bring in the vast majority of cash (£147.4m) but Renishaw’s healthcare business did manage to grow revenue by 25% to £6.6m, again once foreign exchange fluctuations are accounted for.

While a fall of 9% in adjusted pre-tax profit to £32.6m may explain the initially negative reaction to today’s update, the gradual rise back to positive territory suggests that shareholders are comforted by the company’s belief that it is now “well placed to benefit” from recent investment and management’s ongoing confidence on revenue and profit growth in the current year, despite our forthcoming departure from the EU.

If only the same could be said for other stocks. 

The post Why I’d consider holding this FTSE 100 growth stock until retirement appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Renishaw. 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.

Rising from the ashes

Rentokil first appeared on my radar back in 2011. At the time, the company was still trying to recover from the financial crisis. A debt-funded acquisition binge before the crisis had left it struggling with over £1bn in debt and £2.1bn of liabilities in total, against only £2bn of assets. In other words, the enterprise had negative shareholder equity and was, therefore, effectively worth less than zero.

However, Rentokil’s most important asset, its strong global franchise, wasn’t reflected on the balance sheet. And, as rodents don’t take time off, Rentokil’s pest control business helped pull the company out of the gutter.

Over the next few years, management worked tirelessly to rebuild the group. In 2017, all the hard work paid off when Rentokil was promoted back into the FTSE 100 (the firm was kicked out just after the crisis). When the group officially returned to the index, CEO Andy Ransom told investors: “We’re back where we belong!“

In my view, Rentokil’s recovery is a testament to the company’s robust business model. It’s one of the world’s leading pest control businesses, a market where reputation counts for everything, and there will always be a demand for its services. As well as leading the market in pest control, the firm is also one of the UK’s leading providers of specialised deep, and industrial cleaning. Once again, this is a business where reputation and scale count for more than having the lowest cost. 

Also, at a time when so many industries are being disrupted by new and innovative technologies, I believe Rentokil is one of the few businesses shielded from such changes. 

Beating the market

Over the past 10 years, shares in the pest control business have produced an average annual return for investors of just under 17%, turning every £1,000 invested into £5,400. Investors have benefited from both earnings growth and the recovery of the market’s confidence in the business. Indeed, right now shares in the company are changing hands at 25 times forward earnings. In 2012, you could buy the stock for less than 10 times earnings. 

I believe it’s worth paying a premium to be part of this growth story. To complement organic growth, management is pursuing the acquisition of smaller businesses in regions where it doesn’t yet have exposure. Last year, 41 new businesses were bolted on to the Rentokil empire.

Conclusion 

All in all, considering the company’s existing dominant position in the defensive pest control market, acquisition strategy, and its record of growth (despite the stock’s high valuation), I would be more than happy to buy Rentokil right now. Only adding to the investment case is the firm’s dividend record. The business has delivered eight consecutive years of 10% annual dividend growth. The stocks currently yields 3%.

The post The one FTSE 100 stock I’d buy right now appeared first on The Twelfth Magpie.

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Rupert Hargreaves does not own any share 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.

Heralding “another pleasing year of organic and acquisitive growth,” net revenue rose 8.8% to £977.7m over the 53 weeks to 30 March. Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 8.9% to £150m and pre-tax profit jumped 32.2% to £59.6m.

Away from the figures, the company said it made “good progress” in analysing the opportunities in the energy from waste space and expects to report on an investment in such facilities “in due course“. Despite “challenging” markets, the economic and environmental drivers in recycling also “remain compelling” and investors will likely be pleased to hear that the company is positioning itself to take advantage of these in the future. 

So, why the fall? Given that expectations for the current year remain unchanged, most of this can probably be attributed to the announcement that CEO Ian Wakelin has decided to leave the company. Chief Financial Officer, Michael Topham will take the reigns once a successor for his post has been appointed. After rising 15% since the end of May, some profit-taking was also to be expected.

Time to buy?

Earnings per share of 19.2p for the last financial year leave Biffa’s shares trading on 12 times trailing earnings. That seems fairly reasonable considering the defensive nature of its work and its future outlook.

The 88% rise in the final dividend — from 2.4p to 4.53p per share — is another positive and gives prospective investors some indication of how committed management is to growing payouts. A total dividend of 6.7p per share might leave the stock on a trailing yield of only 2.9%, but the fact that underlying free cash flow rose from £28.8m in 2016/17 to £44.4m in the last financial year suggests further increases look pretty likely.

Taking all this into account, I continue to think that Biffa is worthy of consideration from defensive-minded value and income investors.

Another winner

Pest control company and FTSE 100 constituent Rentokil Initial (LSE: RTO) is another stock whose less-than-appealing line of work hasn’t stopped it from strongly rewarding shareholders over the last few weeks. 

Ongoing revenue increased by 15.7% to just under £546m in the three months to the end of March, even if organic revenue growth of 3.2% was down on the same period in 2017 due to the aftermath of a hurricane in Puerto Rico and “unseasonably cold” weather in the US keeping bugs away.

The post 2 dividend growth stocks that could help you make a million appeared first on The Twelfth Magpie.

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Paul Summers 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.