Cranswick

When I think of growth industries, I might think of silicon chips, digital apps or electric vehicles.

But what about chicken sandwiches? It might not be an obviously dynamic area, but meat products specialist Cranswick (LSE: CWK) has actually cooked up a very impressive growth recipe. Its revenues have risen at a compound annual rate of 10% over the past five years, with adjusted profit before tax showing 12.6% compound annual growth in the period.

That has helped the company reward shareholders. The Cranswick dividend jumped by an average 11.4% per year over the period, on a compound basis. Even better, the firm has now increased its dividend annually for over 30 years without a break.  

Yet the Cranswick share price today is 20% below where it stood a year ago. I think it now looks like good value for my portfolio, given the firm’s growth potential. It trades on a price-to-earnings ratio beneath 15.

There are risks ahead, of course. Cost inflation and wage increases could eat into profits. Tightening consumer spending might lead some shoppers to shun pricier snacks, hurting revenues. But I see Cranswick as a well-run business with a proven ability to grow. That is why I count it among growth shares to buy now for my portfolio.

S4 Capital

With interim results due tomorrow at digital ad agency network S4 Capital (LSE: SFOR), shareholders including myself will be looking for better news than we have had so far in 2022. The year’s list of woes have ranged from delayed results to reduced expectations of profitability.

Those disappointments help explain why the shares have lost half their value this year. They are 63% cheaper now than they were a year ago.

But is that share price tumble really merited? Although I see staff costs threatening profitability as a risk, the growth story at S4 remains exceptional. The company has said it expects to double revenues and gross profits within three years. Acquisitions could add further growth on top of that.

The share price has been hammered, but I feel that has obscured the strong long-term prospects the company enjoys. Tomorrow’s results will be a useful point to see whether it has continued to make good progress. I recently increased my position ahead of the results.

Growth shares to buy

From meat processing to digital marketing, these two companies sound like they are very far apart.

But both have business models I think can generate increased sales in years to come. Their company valuations are both discounted from where they stood a year ago. I see them both as growth shares to buy now for my portfolio.

Domino’s Pizza

Shares in the fast food company Domino’s Pizza (LSE: DOM) are down 39% over the past year. That reflects concerns that tightening spending by consumers will lead to less demand for pizzas cooked away from home.

But is that the case — and if so does it mean business performance will get worse? After all, Domino’s has been streamlining its operations in the past several years and focussing on its most successful market. It has also been buying back its own shares.

That could mean that even a downturn in revenues does not necessarily mean a drop in earnings per share. Last month’s interim results make the point – although revenues slid 5.6% compared to the same period the prior year, post-tax profits and statutory basic earnings per share both rose.

Buffett thinking applied to a FTSE 250 share

Investor Warren Buffett talks about the benefit to a business of having a moat that can give it a competitive advantage. Domino’s benefits from a strong brand and established network of supply depots and branches. That would be hard for a competitor to replicate cost effectively. That helps explain why in the second quarter of the year, the firm’s share of the UK takeaway market grew from 6% to 6.6%. In a market facing the risk of weakening customer demand, the strongest operators are more likely to survive – and I see Domino’s as one of them.

The shares have a dividend yield of 4%. I think the share price fall means they are now a bargain for my portfolio, trading on a price-to-earnings (P/E) ratio of 14, so I would consider buying them.

Cranswick

Shares in food producer Cranswick (LSE: CWK) have lost a quarter of their value in the past year.

Like Domino’s, I see Cranswick as a high-quality business with attractive competitive strengths. It has built deep relationships with many customers and figured out how to add value to meat products by processing them, enabling attractive profit margins.

Cranswick’s financial record is stellar. Revenue last year grew 5.8%. Basic earnings per share grew 11%. The company raised its dividend by 8%, marking 32 years of unbroken growth in shareholder payouts at the company.

Past performance is no guarantee of what may happen next and the company does face risks. For example, rising input and energy costs could hurt profit margins. But I see this as a great quality business. The P/E ratio of 16 is not exactly cheap in my view, but I do think it is good value for such a firm. I would happily add the shares to my portfolio.

Marks and Spencer

Marks and Spencer (LSE: MKS) is a major British multinational retailer that sells clothing and beauty, home, and food products. This week, three director dealings were carried out. A large number of shares were received in lieu of a cash dividend, but a portion was sold to cover tax and national insurance obligations.

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 203,120 @ nil
• Total value: N/A

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 99,121 @ £1.37
• Total value: £135,805.68

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 138,115 @ nil
• Total value: N/A

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 67,399 @ £1.37
• Total value: £92,343.37

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 131,691 @ nil
• Total value: N/A

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 62,264 @ £1.37
• Total value: £88,048.11

Cranswick

Cranswick (LSE: CWK) is a leading UK food producer and supplier of fresh and premium food products. It’s most famous for its meat products. Four directors opted to exercise their share options this week. However, they then proceeded to sell portions.

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 48,100 @ nil
• Total value: N/A

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 24,775 @ £30.82
• Total value: £763,515.95

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 26,300 @ nil
• Total value: N/A

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 13,546 @ £30.82
• Total value: £417,460.628

HomeServe

HomeServe (LSE: HSV) offers low-cost home warranty and home repair options. It markets itself as the solution to expensive and inconvenient emergency home repairs. Three massive director dealings happened earlier in the week, as shares were awarded to these directors based on performance conditions.

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 21,119 @ nil
• Total value: N/A

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 10,190 @ £11.69
• Total value: £119,121.10

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 30,619 @ nil
• Total value: N/A

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 11,815 @ £11.69
• Total value: £138,117.35

• Name: Richard Harpin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 34,911 @ nil
• Total value: N/A

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, all the director dealings above occurred with free shares. These shares were acquired by directors under their companies’ share plans. These were either a restricted share plan (Marks and Spencer), or incentive plans (Cranswick and HomeServe).

Share award schemes give employees actual shares rather than share options. The value of shares given to directors here is treated as employment income. This means that it may be subject to tax and national insurance contributions. That is unless the directors opt for an HMRC-approved share scheme, which has its own rules and requirements. Incentive plans give directors shares when they hit certain performance targets. For HomeServe directors, the awards were subject to the company’s earnings per share.

That is sometimes known as a progressive dividend policy. I like such a policy because not only could it boost my passive income streams, it also suggests that a company’s management has confidence in its business outlook.

But I say “seem committed” because in reality nobody knows what will come next for a company’s dividends. Even a long history of growing dividends is no guarantee that a payout will keep moving up. It might even be slashed – exactly what happened at Imperial Brands several years ago.

Here are a couple of companies that have been increasing their dividends each year for decades. I would consider buying them for my portfolio because I reckon they might keep lifting their payouts in the future.

Cranswick

The meat and food producer Cranswick (LSE: CWK) has been on a tear lately. Consider last year as an example. Revenues were the highest ever. So were profits. So was the dividend.

Despite that, the Cranswick share price has lost over a fifth of its value in the past year. That has pushed the dividend yield up to 2.4%.

Cranswick’s growing dividend is not a new phenomenon. It has raised its annual dividend for 32 years in a row. Nor was the increase last year just tokenistic. At 8%, it was suitably meaty. Over the past decade, the Cranswick dividend has had a compound annual growth rate of 9.7%. I find that highly impressive.

Can Cranswick keep growing dividends?

What excites me most about Cranswick is not its past but its future. As the results demonstrate, the company has developed a highly efficient, consistently profitable business model. I think that could support future dividend increases.

There are risks ahead, such as a lack of abattoir workers pushing up costs and hurting profits. But I would be happy to buy and hold Cranswick in my portfolio.

DCC

Another company I think might be able to extend its impressive record of growing dividends is the conglomerate DCC (LSE: DCC).

It grew its annual dividend in 2021 as it has done for 27 consecutive years. The increase was sizeable, at 10%. The dividend has grown at a compounded annual rate of 9% over the past decade (allowing for a switch from reporting in euros to pounds).

DCC has a collection of businesses that are highly cash generative. Free cash flow last year jumped to £688m. Paying dividends did not even use up a quarter of that cash. So the company is generating a lot of money it can invest in its healthcare and technology divisions. Both recorded double-digit earnings growth last year.

The core energy business also grew profits, but only modestly. A declining demand for gas in some markets is a risk to both revenues and profits at DCC. But I think its mixture of businesses positions the firm well for a changing world. I think it can keep growing dividends and would consider buying it for my portfolio.

JD Sports

Sudden management changes are rarely popular with investors. That is just one of the reasons the past year has seen the JD Sports (LSE: JD) share price tumble 36%.

But set against that price movement are the company’s latest annual results, which came out this week. JD Sports saw record turnover and profits. The company raised its annual dividend by an impressive 21%. It also said that it expects revenues and profits this year to match those from last year. That is despite risks to the company, such as an economic slowdown in key markets that could lead to lower revenues.

Given the strong performance and upbeat outlook, I think the slump in the JD Sports share price now looks overdone. I see it as a buying opportunity for my portfolio.

Howden Joinery

Another share that has seen its price plummet over the past 12 months is Howden Joinery (LSE: HWDN). It has fallen 27% in that period. The company now trades on a price-to-earnings ratio of 11 and has a dividend yield of 3.2%.

But like JD Sports, Howden’s business performance has been strong. Last year’s revenues grew 35% compared to the prior period. Profit more than doubled, to £390m. Like JD Sports, this was a record set of financial results. That has not been enough to satisfy the City. The risk of a slowing economy cutting demand for building products is worrying investors.

I see the long-term growth story at Howden as attractive. I think its network of depots and relationship with tradespeople give it a sustainable competitive advantage. I reckon the current share price is a bargain and would consider adding the company to my holdings.

Cranswick

A third big faller over the past year is food producer Cranswick (LSE: CWK). Its shares have fallen 21% over the past period.

What about its business performance? In its prelim results last month, Cranswick announced revenues up 6% on the prior year and profits up 12% in the same period. Like the two shares above, this was a record performance. The company rewarded shareholders with an 8% increase in its annual dividend. That means Cranswick has now raised its payout for 32 years on the trot.

Past performance is no guarantee of what comes next. Rampant cost and wage inflation could hurt profits at food producers like Cranswick. But the company is a well-oiled machine with a proven business strategy and robust customer demand. I would consider adding its shares to my portfolio.

UK shares to buy now

All three of these businesses delivered record revenues and profits last year. Yet all of them have seen their share prices slide by at least a fifth in the past year. That is why I see them as UK shares to buy now for my portfolio.

Diageo

Increasing income could be worth raising a glass to celebrate. When people do that, with drinks from Guinness to Baileys, it helps boost sales at drinks giant Diageo (LSE: DGE).

The company behind many famous names on bar shelves around the world has an attractive record when it comes to boosting dividends. It has done that each year for over three decades. What helps fund this growth? Partly it is the attractive profit margins of the alcoholic beverage industry. But I think Diageo’s careful management and development of a range of premium brands also helps its profitability.

Whether that can continue depends partly on customers being willing to pay for a premium tipple. One risk is a decline in alcohol consumption in some markets, although Diageo is trying to combat that by extending its non-alcoholic offering. I think the firm’s brand portfolio and global reach could be good for future profits – and hopefully dividends too.

DCC

Another consistent dividend grower is DCC (LSE: DCC). The company operates in a variety of businesses including gas distribution.

The dividend has long been a high priority for DCC management. The company has raised its dividend annually for over a quarter of a century. Those rises have been sizeable, with double-digit percentage increases in each of the past couple of years. Currently the yield is 3.1%.

What does the future hold for the dividend? A decline in the use of bottled gas in some markets could hurt both revenues and profits at the firm. But I think its range of businesses helps give it a diversity of income sources. I like the importance DCC attaches to its dividend and would consider buying it for my portfolio.

British American Tobacco

Another company that has raised its dividends annually for decades is British American Tobacco (LSE: BATS).

Lately the increases have been small and the company has started using some of its excess cash to buy back its own shares. But although the growth rate may have slowed, I see ongoing potential for dividend increases at British American. It is a highly cash  generative business.

A risk I would consider here is a declining number of cigarette smokers leading to falls in both sales and earnings. The company is developing non-cigarette product ranges, but so far their profitability looks much less attractive than that of cigarettes. For now at least, there is still enough demand for cigarettes to help support a growing dividend. I see British American among the UK shares to buy now for my portfolio.

Judges Scientific

Judges Scientific (LSE: JDG) manufactures specialist equipment like microscopes. But no such device is needed to measure recent increases in its dividend, as they have been large. Last year, the dividend grew by 20% compared to the prior year. Indeed, the dividend has more than doubled over the past four years.

One risk to the company is ongoing delays in getting access to some sites for installations in markets where pandemic restrictions remain in place. That could hurt sales and profits. I would also like it if Judges had a higher yield – at the moment, it stands at just 0.8%. If my focus was not on yield but on prospects for ongoing dividend growth, though, Judges Scientific would make the list of shares to buy for my portfolio.

Legal & General

With a 7% yield, adding Legal & General to my portfolio could provide a juicy boost to my passive income streams. But I also think the insurer could be a good choice for me when it comes to dividend growth. It has already set out its plans to grow the dividend annually over the next several years.

No dividend is ever guaranteed, of course, and the financial services firm does face risks. For example, changed rules on renewal pricing for insurance policies threatens to dent profits. But I think there is a lot to like about the Legal & General investment case. Its strong brand, large customer base and deep experience could help the company do well in the future.

Cranswick

Meat producer Cranswick (LSE: CWK) may not be a household name, but its products are stocked under a variety of names in many thousands of shops.

Cranswick has spent decades developing its product range. So it is not simply a meat supplier charging commodity prices. Through its processed products, it is able to charge premium prices. That can be good for profits – and dividends.

Indeed, in its preliminary results yesterday, the company announced that it had maintained its operating margin at 7%. I was pleased to see that, as disruption in the meat supply chain is an ongoing threat to profitability. Earnings per share increased by 11%.

The company also announced an 8% increase in its dividend. This is the 32nd consecutive year of dividend increases. I think the company’s strong business prospects bode well for future growth. That is why Cranswick is on my buy list of UK shares.

Unilever

The final name on my list of seven shares to buy is Unilever.

Inflation could push up costs at the consumer goods giant. But that is where I think it can benefit from its portfolio of premium brands, such as Dove, giving it pricing power. Evidence of that came in its first-quarter results. Sales volumes slipped slightly, but revenues grew due to price increases.

Unilever pays quarterly dividends. I think its large, diversified business should provide robust revenues in the next few years even in the face of an economic slowdown. That should help it support dividend increases.

No dividend is ever guaranteed. But by spreading my investment over seven different companies in a diverse range of business sectors, I would hopefully see at least some of them raise their dividends in coming years. That is why I would buy them now.

Cranswick is one of the UK’s leading food producers and supplies premium, fresh food products.

As I write, the shares are trading for 3,602p. This time last year, they were 3,806p, which means the shares have dropped 5% over a 12-month period. So with the price falling and some investors clearly losing interest, why am I upbeat on the firm?

The bear case

But first, the negatives. Cranswick could see its profit margins squeezed due to rising costs linked to soaring inflation. Many businesses are wrestling with the same problem. When a dividend stock is in danger of a profits fall, dividends can also suffer. This means any passive income I hope to make could be under threat.

There has been a real shift in recent years away from meat products and towards vegetarian, vegan and plant-based foods in developed markets. Yet I don’t think this is a pressing worry as this could be offset by demand in up-and-coming economies.

Recent labour shortages and the supply chain crisis could affect Cranswick’s performance and any passive income stream in the short-to-medium term too. This is an issue facing many businesses throughout the world in many different sectors.

The bull case

That said, I see plenty of positives. Cranswick has an excellent history of dividend payments. In fact, it has increased its dividends year-on-year for the past three decades! This is a remarkable feat and one that excites a passive-income-seeking investor like myself. At current levels, the dividend yield is just under 2%. This may not seem the most attractive, but I’m more buoyed by consistent payouts and growth.

So how has Cranswick managed to increase its returns for so long? Well, it has an excellent track record of performance. I do understand past performance isn’t a guarantee of the future. However, Cranswick has enjoyed revenue and gross profit increases for the past three years — one of the toughest periods in business history!

Coming up to date, a Q3 trading statement released in February was promising, with mentions of solid trading and a robust balance sheet, albeit a lack of figures. Full-year interim results are due next month. I’d expect to see growth in earnings and dividends and I’d expect the shares to move upwards too.

Meat may not be seen as a growth market, but overall meat demand in the world is increasing. This could benefit Cranswick, and boost performance as well as shareholder returns.

A passive income stock I’d buy

It may not be the most glamorous business and there are other stocks that possess higher dividend yields. Despite this, I’m enticed by its growth story, consistent payouts and the track record to date.

I would add Cranswick shares to my holdings at current levels and hold on to them to help boost my passive income stream. The shares currently sport a price-to-earnings ratio of just 19. Although that’s above the traditional ‘value’ benchmark, this looks like good value to me based on consistent earnings and dividend growth. Plus there’s the fact the shares are still trading lower than last summer’s highs of over 4,000p.

Judges Scientific

A growing company based on the Buffett approach is how I would describe Judges Scientific (LSE: JDG). The firm buys small scientific instrument makers at attractive valuations, then largely leaves them alone to get on with what they do best.

For such instruments, accuracy matters. So customers are willing to pay premium prices. Demand is likely to remain strong, although one short-term risk I see is the continued shutdown of some facilities due to the pandemic leading to sales being postponed or cancelled.

In recent years, percentage dividend growth has consistently been in the double-digits. Last year the dividend went up 20%. While the price-to-earnings ratio of 28 is not cheap, I find the share price more attractive than a few months ago. I am keeping an eye on Judges as at the right price, I would be happy to buy it.

Cranswick

Another dividend growth share I am eyeing for my portfolio is Cranswick (LSE: CWK). The company produces a range of foodstuffs, such as fresh pork and cooked meats. In the past five years, revenues have grown at a compound annual rate of 13%. Adjusted earnings per share grew even faster.

On the dividend front, the five-year compound annual growth rate was 13.3%. Cranswick also has an impressively consistent record of raising its dividend annually. The payouts have gone up each year since the early 1990s.

Past performance is not a guide to what will happen next. But I reckon growing demand for meat in developing markets means that the company can continue to grow revenues. A shortage in some markets could help maintain attractive profit margins. If that leads to a glut of meat production, profits could fall in future. But at the moment, I would consider adding this proven dividend growth share to my portfolio.

Diageo

More modest dividend growth is the norm at brewer and distiller Diageo. Last year it saw dividend growth of 3.8%.

Like Cranswick, the company has raised its dividend annually for decades. That reflects the pricing power the company enjoys, as well as its continued push into new markets. By building a portfolio of premium brands such as Guinness, the company has been able to encourage customer loyalty even in the face of price rises. So while cost inflation poses a risk to profits, over time I reckon Diageo ought to be able to maintain attractive profit margins. That could help keep dividends growing.

Building dividend growth into my portfolio

I like the prospect of owning shares with strong dividend growth potential. But I also consider yield. While Judges has been growing its dividend, for example, the yield remains below 1%.

But each of these three shares has what I see as an attractive business model I think can help support dividend growth in future. If I can buy them at an attractive valuation, I would be happy to hold them in my portfolio.

The headlines may remain reserved for the red-carpet shenanigans, but the dividend stock has been quietly continuing its ‘Second Nature’ programme of works across various sustainability measures.

Designed to ensure its business helps lead positive change in the food production industry, it’s a great example of seeing company strategy being delivered.

And hitting one of its key milestones of all 14 eligible manufacturing sites being certified carbon-neutral certainly helped pull off its own big win on the sustainability front.

But what’s its performance like financially? Well, it appears that the quiet but intentional delivery model seems typical of the Cranswick approach.

Its last interim results show us that the £220m invested in its poultry operations over the last eight years is now paying handsome dividends.

As a direct result, Eye’s production capacity — one of its main processing plants — increased from an average of 1.1m birds per week to 1.3m – up over 18%.

Combined with other improvements, overall poultry revenue increased by 35.5%.

With 19% of the group revenues coming from this division, that’s good news for the future. Especially as further capacity enhancements are expected in the second half of the year.

It’s not all plain sailing, though, as its Fresh Pork division continued to be hampered by a licensing issue to resume exporting to the Far East, notably China.

Combined with the shortage of butchery skills, this left that departments’ revenues down 5.3% compared to like-for-like in the previous period.

But for me, one of the most telling things about a company’s prospects is how it is preparing for the future.

Is it ignoring headwinds? Changing trends? Or facing up to the facts and adapting accordingly?

As such, it was reassuring to see news about the two most recent acquisitions by Cranswick, with both being non-meat-based.

Ramona’s Kitchen, with its plant-based Mediterranean foods, and Atlantica UK’s brand Spanish Tortillas should both fit nicely with the continued expansion of its Continental Products business whilst providing diversification across its earnings.

At the end of the day, though, from an investment perspective, it’s all about total financial delivery. And those numbers looked good, with overall revenues increasing by 6.6% despite the tough trading period.

And whilst the dividend yield rate of ~2% may not be headline-grabbing, the substantial increase from 60.4p to 70p (+14.9%) from ’20 to ’21 is certainly worth noting.

Combine that with its 31-year track record of unbroken dividend increases, and it seems Cranswick continues to deliver quietly but effectively.

As such, with this solid financial base and an executable future strategy, I’m considering this, perhaps less Oscar glamourous but equally award-winning, FTSE 350 firm for a place in my defensive-focused portfolio allocation.

One way of separating the wheat from the chaff is to look for companies that have better-than-average records of consistently raising their bi-annual payouts.

Here are three examples, all of which come from the FTSE 250 and probably remain under the radar of many private investors.

Cranswick

Meat supplier Cranswick (LSE: CWK) is a great passive income stock, in my view. The company has a long history of growing its annual cash returns to investors. In fact, hikes in recent years have often been by double-digit percentages. So while no dividend stream can be guaranteed, this is exactly the sort of form I’m looking for.

Based on recent trading, I have no concerns over this trend continuing. In its most recent update, the FTSE 250 stock said trading over the festive period has been “comfortably ahead” of the same time in 2020. This was despite “unprecedented industry-wide labour and supply chain challenges” and cost inflation.

Will we still be talking about these headwinds in a few years though? I sincerely doubt it. 

As good as the dividend hikes have been, Cranswick is a fairly low-margin business. Admittedly, the 2.2% forecast yield isn’t all that generous compared to others in the UK market either. 

Still, the amount of free cash flow (essentially, what allows a company to pay passive income to holders) is looking very healthy indeed. This makes me believe the company will continue growing its dividends in the years ahead. 

Bodycote

Heat treatment and thermal processing specialist Bodycote (LSE: BOY) is another FTSE 250 member that’s been increasing its annual payouts to investors for a long time. This quality tends to be indicative of a very resilient company.  

As things stand, Bodycote is expected to yield 21p per share in FY22. That becomes a yield of 3%. Again, this fairly average return doesn’t bother me. I’d rather invest in a company where my passive income is likely to be paid and also increasing every year. 

The shares have fallen 20% in 2022 so far, which highlights how even solid dividend payers can be just as volatile as more growth-focused stocks. Headwinds, such as supply chain disruption and cost inflation, won’t go away overnight either. 

Nevertheless, Bodycote seems to be trading just fine. This month’s full-year results revealed a 7.1% rise in revenues to almost £616m. Operating margins also rose to 15.4%. 

Clarkson

Shipping services provider Clarkson (LSE: CKN) strikes me as another stock that many private investors might be unfamiliar with. Similar to the other two shares mentioned here, the £1.1bn-cap company regularly lifts its annual dividend. In fact, it’s been doing this for the last 19 years! 

A forecast 2.5% yield in 2022 is expected to be covered almost twice by profit. That last bit is important. The greater the dividend cover, the less likely it is that the payment will be cut.

On the downside, shares in Clarkson aren’t a bargain, at almost 21 times earnings. This potentially makes the stock a more risky buy.

Even so, the balance sheet looks pretty solid to me. Earlier this month, Clarkson also announced record underlying pre-tax profit of £69.4m for 2021. Maintaining this kind of form should allow the passive income to keep ticking higher.