Forget the Cash ISA! I’d buy these FTSE 100 dividend growth stocks to make a million

In my opinion, the market’s best investments are those companies that have a definite competitive advantage and have a track record of creating value for shareholders. There are only a handful of businesses that fall into both of these baskets. 

One of them is Bunzl (LSE: BNZL), a one-of-a-kind business. It operates in the relatively dull industry of outsourcing, but the company has been able to excite shareholders with fantastic returns. Over the past decade, the stock has returned 13.8% per annum, and the group has increased its dividend payouts to investors for 26 consecutive years.

Growth through acquisitions 

Bunzl’s growth has come from both organic expansion and bolt-on acquisitions. The company claims to have made 157 acquisitions since 2004, spending on average £222m a year and adding average annualised revenue of £278m. 

As long as the company continues to make sensible acquisitions at attractive prices, I see no reason why this growth trend cannot continue.

Now looks to be a great time to buy into this growth story. The stock is down around 20% since April when management warned revenue growth was not living up to expectations due to challenging macroeconomic and market conditions.

Following the decline, shares in Bunzl have fallen to a forward P/E of 15.9, substantially below the five-year average of 20. There’s also a dividend yield of 2.6% on offer for income seekers.

And if the stock returns 13.8% per annum for the next 10 years, I calculate it could turn a £10,000 investment into nearly £40,000. At this rate of return, an investment of £50,000 could grow to be worth just over £1m in 22 years. 

Competitive advantage

Another FTSE 100 dividend growth stock I believe could help you make a million is Coca-Cola bottler Coca Cola HBC (LSE: CCH). 

This company’s primary competitive advantage is its exclusive licence to bottle Coca-Cola in many European countries, as well as other products. The unique manufacturing agreement has helped the firm grow earnings at a rate of nearly 15% per annum for the past six years. This expansion has helped support dividend growth of 10% per annum since 2013. 

It looks as if this trend is set to continue with City analysts predicting earnings growth of 18% over the next two years. According to a trading update published today, the firm is on track to hit these growth targets despite adverse weather conditions across Europe. 

As well as its core European market, Coca Cola HBC is also expanding into emerging markets. The group recently acquired Bambi, the leading confectionery brand in Serbia, which added 0.8% to revenue growth in the third quarter of 2019. 

Impressive returns

As Coca Cola HBC’s earnings and revenues have ballooned over the past few years, the stock price has also surged higher, rewarding investors who bought in at the company’s IPO back in 2013. 

Over the past five years, including dividends, the stock has produced a total annual return of 15%, in line with earnings per share. If earnings continue to expand at a double-digit rate, I think there’s a good chance this trend will continue. It would take 20 years to turn a £50,000 investment into £1m at an average annual total return of 15%.

The stock is currently trading at a forward P/E of 19.5, slightly below its five-year average of 22.5, and it also supports a dividend yield of 2.5%.