I’m long-term bullish on the stock market and see the current market correction as an opportunity to load up with quality stocks.
Discount retailer B&M European Value Retail SA (LSE: BME) and soft drinks supplier Britvic (LSE: BVIC) are near the top of my watch list, and one of the first attractions is their dividends. At today’s share price around 702p, Britvic has a forward dividend yield of 3.9% for 2018 and B&M’s is 2.1% at the recent share price of 407p.
Good form
B&M has increased its dividend payment by 122% over three years and Britvic by 44% over four years. City analysts following these two expect B&M to push up its dividend around 13% for the trading year to March 2019 and a little over 16% the year after that. They predict Britvic will increase its dividend by just over 3% this year and 5% next year. Both companies are doing a good job of rewarding investors with progressive dividends, and the fact that they are able to do that suggests healthy underlying businesses.
B&M’s range of grocery and fast-moving consumer goods has really hit the spot with customers seeking everyday value. My local out-of-town B&M store is always heaving with customers whenever I pop in, and the situation is probably similar at many branches, judging by the firm’s growth numbers. Analysts forecast 19% growth in earnings for the year to March 2019 and 13% the year after that. In January’s trading statement, chief executive Simon Arora said “B&M continues to go from strength to strength,” and I can’t see any sign of the operational momentum slowing down. Maybe competitors will eat into the firm’s market share in time, but I think the B&M name itself is a brand that customers seem to trust. As long as the company keeps giving customers what they want I reckon many will remain loyal to it.
Defensive strength
Meanwhile, Britvic’s rate of earnings growth is slower with analysts expecting just a 1% uplift for the current year to September and 5% next year. However, the firm operates in a defensive sector with strong brands, and I reckon the higher dividend yield on offer compensates for lower growth figures.
In January’s trading statement, chief executive Simon Litherland told us that Britvic “delivered a solid start to the new financial year, with group revenue growing 3.3% ahead of a strong first quarter last year.” He admitted that the government’s new soft drinks levy in the UK and Ireland “brings a level of uncertainty,” but went on to say that the “strength and breadth” of the firm’s brand portfolio will help the company overcome challenges thrown up by this attack on the sugar content of soft drinks.
I don’t think people will stop buying the firm’s brands such as Robinsons, Drench, Pepsi Max, 7Up, J2O and Fruit Shoot just because the sugar content is reduced, and I think Britvic’s defensive qualities remain attractive and capable of powering ongoing growth in the dividend in the years to come. Meanwhile, B&M’s fast growth looks set to keep the retailer’s dividend growing, so I see both these stocks as attractive long-term bets and ideal for buying when any dips occur due to general stock market weakness.