LONDON -- In an outcome that's tough on investors, the FTSE 100 (INDEX: ^FTSE) has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF, for example. This is an exchange-traded fund that tracks the benchmark index, and we can see that the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:
Dividend per share
That's disappointing. But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is Reckitt Benckiser (ISE: RB.L) .
The big question is can Reckitt's dividend continue to outperform its index? Let's put the firm under scrutiny and test its financial mettle.
Reckitt Benckiser is a household cleaning products manufacturer with worldwide operations. With the shares at 3,592 pence, the market cap is around 26 billion pounds. This table summarizes the company's recent financial performance:
Revenue (millions of pounds)
Net cash from operations (millions of pounds)
Earnings per share
Dividend per share
So the dividend has increased by 127% during the last five years -- equivalent to a 22.8% compound annual growth rate.
Reckitt and Benckiser merged in 1999 after developing as individual businesses throughout the 19th century. Today, the company is the world's largest household cleaning products manufacturer with more than half its revenues generated from its fabric care and surface care divisions.
Reckitt's strong consumer brands drive the success of its operation, such as Finish, Dettol, and Cillit Bang. As well as developing new names in house, the firm keeps watch for well-known brands that it can acquire to help fuel its expansion. In 2005, it added the Nurofen, Strepsil, and Clearasil brands to its portfolio with the 1.9 billion pound acquisition of Boots Healthcare International.
Right now, the firm derives around 43% of revenue from Europe, 25% from North America and Australia, 24% from developing markets, and 8% from its pharmaceutical division. Developing markets have powered recent sales growth. That's encouraging, as Reckitt has a fine history of converting revenue growth to cash flow growth-ideal for supporting a progressive dividend policy.
Reckitt Benckiser's dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:
1. Dividend cover: Earnings covered the recent dividend around 1.9 times. 3/5
2. Net cash/debt: The recent interim results showed net gearing around 34%. 4/5
3. Cash flow: Cash flow supports profits and both are trending up. 5/5
4. Outlook and recent trading: Both recent trading and the outlook are good. 4/5
Overall, I score Reckitt Benckiser 16 out of 20, which encourages me to believe the firm's dividend can continue to outpace dividends from the FTSE 100.
Although dividend cover is lower than I would like to see, Reckitt's cash flow credentials, manageable borrowings figure, and positive trading outlook are all reassuring.
Right now, Reckitt's forecast full-year dividend is 132.24 pence per share for 2013, which supports a possible income of 3.7%. That looks attractive to me.
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The article Reckitt Benckiser: A FTSE 100 Dividend-Raising Star originally appeared on Fool.com.
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