The FTSE 250’s Britvic (LSE: BVIC) looks like a decent candidate to consider for a long-term diversified portfolio.
Apart from a wobble during the travails of the pandemic, the dividend record looks steady. City analysts forecast that 2024’s shareholder payment will likely be around 18% higher than 2017’s. And most years in between have delivered an increase.
Gentle growth in revenue, earnings and cash flow has supported the dividend in most years. Therefore, Britvic has the basics in place for consideration as a dividend-led investment.
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With the share price near 838p, the forward-looking yield is about 3.7% for the current trading year to September 2024. And the anticipated earnings multiple is just below 14. That’s not an outrageous valuation and the level of shareholder income is worth having.
Well placed to thrive
Meanwhile, the potential for the dividend to increase in the coming years adds to the share’s appeal. Analysts have pencilled in an uptick of just over 7% for the payment in the current trading year.
I like Britvic because its soft drinks operations are in a defensive sector. That means the business is less likely to be affected by the ups and downs of the economy. And that’s because of it offers fast-moving consumer goods with strong brands.
However, the company does have its vulnerabilities as the economic shock of the pandemic proved. It’s possible, for example, that any future prolonged period of financial difficulty for customers could see them switch to cheaper alternative products.
There’s risk in that potential for shareholders. But we could argue that Britvic has just survived such a weak, multi-year period. And I’m optimistic that better economic times are on the way.
My feeling is that the company is well placed to thrive in the coming months and years, backed by its brands such as Fruit Shoot, Robinsons, Tango, J2O, London Essence, Teisseire and MiWadi. On top of that, it produces and sells PepsiCo brands under exclusive agreements, including Pepsi, 7UP and Lipton Ice Tea.
The chart shows a share price trending sideways. And I think that’s a stoic performance given the general economic challenges over the past few years. At least the stock didn’t collapse like many others in the period.
As a rule of thumb, strong stocks that resist bear markets can often perform well when things turn bullish again.
Decent results and growth potential
Meanwhile, the full-year report released today, 22 November, is encouraging. In the 12 months to 30 September, revenue rose almost 7% year on year and adjusted basic earnings per share by 6.5%.
The directors rewarded shareholders for the firm’s good performance by slapping just over 6% on the full-year dividend. And that carries on the tradition of steady dividend-raising we’ve come to expect from the company.
Looking ahead, chief executive Simon Litherland said Britvic has an “exciting” programme of marketing and innovation launches planned. And he’s “confident” Britvic will make “excellent” progress next year and beyond.
Despite the risks, I’m inclined to give Britvic the benefit of the doubt. And I think it is a good time to research and consider the stock right now.
