I wouldn’t buy and hold every FTSE 100 dividend share until retirement and beyond. But I do like big-cap dividend-paying companies with defensive underlying operations. I think both these selections have the potential to provide my portfolio with capital growth via a rising share price and income growth via shareholder dividends.
A strong record of dividend growth
Unilever (LSE: ULVR) completed the unification of its company legal structure in November. And, for the first time, now trades with one market capitalisation, one class of shares and one global pool of liquidity. Thank goodness! Simplicity is always best if it can be achieved. And the company is maintaining its listings on the Amsterdam, London and New York stock exchanges. So, there should be no problem for investors wanting to buy and sell the company’s shares.
And buying shares in Unilever strikes me as a good idea right now because the share price has eased back a bit recently. However, the fast-moving consumer goods giant is still an attractive candidate for a long-term investment for me.
I like the defensive nature of the sector. Unilever makes products that many people deem to be essential and they tend to show loyalty to the firm’s powerful brands such as Domestos, Ben & Jerry’s and PG Tips. And that leads to stable cash flow, which is ideal for keeping the shareholder dividends rolling out.
The company’s five-year record shows steady annual growth in the dividend. And I reckon that growth looks set to continue after a slight wobble this year because of the pandemic. Meanwhile, with the share price at 4,325p, the forward-looking dividend yield for 2021 is around 3.6%. I’d buy some of the shares now to lock that rising income stream into my portfolio. And I’d hold for at least the next five years, and probably much longer than that.
Accelerating investment for growth
In November, Smurfit Kappa (LSE: SKG) raised a gross €660m in a share placing. That represented just over 8% of the company’s issued share capital immediately before the placing. And the money raised will help the paper-based packaging supplier “capitalise on structural growth opportunities.”
I think the business has some defensive qualities because it serves the fast-moving-consumer-goods sector. And Smurfit Kappa is also an important cog in the trend towards e-commerce and all the parcel deliveries that flow from that trend.
The company reckons it will use the net proceeds of the placing and cash coming into the business from trading to accelerate investment over the next three years. As such, I think this is an interesting time to buy shares in the company.
Indeed, the directors reckon the ongoing development of e‑commerce and rising demand for sustainable, paper-based packaging present opportunities for Smurfit Kappa. So, accelerated investment now will help the company increase its competitive advantage and enhance its operational efficiency.
Meanwhile, with the share price near 3,412p, the forward-looking dividend yield is near 3% for 2021. I’d buy and hold some of the shares to collect the dividend stream while waiting for growth to materialise over the long haul.