Reckitt Benckiser Group (LSE: RB) is a FTSE 100 stock I’ve long praised because of its exceptional growth record and thus its ability to keep raising dividends year after year.
I’ve previously spoken in some depth about the abiding popularity of premium products that allow annual earnings to swell regardless of the broader condition of Reckitt’s marketplaces. And I’ve also crowed about the firm’s wide geographic wingspan and extensive range of products that provides brilliant strength through diversification.
But right now I want to talk about a recent report released by Global Market Insights, research which suggests that the over-the-counter (OTC) drugs market will sweep past $185m by 2025. Driving the stratospheric rise will be “expanding geriatric population base which is highly susceptible to suffer from several diseases such as joint pain,” the researcher tips, while “growing healthcare awareness among people and cost-effectiveness of OTC drugs” will also propel sales to the stars.
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The drugs do work
So why is this good news for Reckitt Benckiser? The Footsie firm has long had exposure to this market through goods like Nurofen painkillers and Strepsils lozenges, and by recently establishing a research centre in Northern England to invest in and develop its OTC healthcare products, it’s in great shape to capitalise on this demand surge over the next half a decade.
Not that share pickers have to just be content with ‘jam tomorrow’ though. Earnings expansion (of 2% and 6%) is forecast for 2019 and 2020 by City analysts, providing the base for predictions of yet further healthy dividend growth — last year’s payout of 170.7p per share is expected to rise to 176.6p this year and to 188.1p in 2020.
You can find bigger yields than Reckitt Benckiser’s, which sit at 2.8% and 3% for this year and next, though thanks to its formidable cash generation and great profits visibility, there are few where dividend forecasts are more robust and even fewer where annual dividends appear certain to keep growing long into the future. For these reasons it’s a top income buy in my book.
Another hot income stock
Another drugs darling in great shape to keep paying chubby, inflation-beating dividends in the future is AstraZeneca (LSE: AZN).
For 2019 and 2020, the pharmaceuticals developer is set to keep the full-year payment on hold at 280 US cents per share, meaning that the yield sits at an attractive 3.5% through this period. I’m quite confident, however, that dividends will start to rise after this period, given the quality of the firm’s drugs pipeline (which facilitated new product sales growth of 81% last year), as well as the pace at which demand from emerging markets is increasing. These properties should supercharge profits sooner rather than later.
City number crunchers share my enthusiasm and are expecting annual earnings growth to rip from a modest 1% in 2019 to 22% next year. And given the rate at which its products are hitting key testing targets and getting regulatory approval, AstraZeneca appears to be in great shape to deliver stonking profits growth well into the next decade.
