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There are some UK stocks that not only pay dividends to shareholders annually, but have even raised their dividend per share annually.
Dividends are never guaranteed, but here are three UK stocks I think could plausibly be paying them decades from now so are worth considering.
Unilever
Washing hair and clothes, moisturising skin. Are any of those activities likely to die out in coming decades?
I do not think so – and that is good news for Unilever (LSE: ULVR). The long-established company has made a big business out of life’s little repetitive tasks. In fact daily, Unilever products are used several billion times around the world.
The market for such consumer goods is highly competitive. Unilever’s long-term investment in building premium brands has given it pricing power however. It also has a number of other competitive advantages, such as some proprietary formulations and an extensive global distribution network.
Spinning off its ice cream business could distract management focus in coming months, but it ought to give the FTSE 100 company more strategic focus. With its proven business model, I think Unilever may keep generating spare cash and paying dividends for decades to come.
Shell
Another British company in an industry I expect to benefit from long-term customer demand is Shell (LSE: SHEL).
Its shock dividend cut five years ago was the first time since World War Two that the oil and gas major had reduced its shareholder payout per share.
With large reserves, extensive industry experience and a strong position in many markets, I reckon Shell could be around for a long time to come. It remains to be seen whether oil continues to dominate its operations.
But even if other energy sources grow in importance, I think Shell’s energy industry experience and existing relationships could help it keep doing well.
Weak energy prices are a risk, potentially eating into profits. Some commodity traders forecast lower oil prices next year. Over time though, I think Shell has a strong enough balance sheet and profitable enough business to keep paying dividends for decades.
Judges Scientific
While I think both those UK stocks could keep growing their dividends, I do not own either. Both are more expensive right now than I would be happy to pay.
At 40 times earnings, the same is true of Judges Scientific (LSE: JDG). Like the other two shares, it is on my watchlist.
With its £433m market capitalisation, the lab instrument specialist is not big enough to be on all investors’ radar. But it has been growing the payout per share by a double digit percentage annually in recent years. Indeed, it targets a minimum annual growth of 10% for its dividend per share. Last week’s interim results brought the latest 10% increase.
Revenue grew 15% year-on-year and basic earnings per share were up 14%.
Judges’ business model is simple. It buys up small- and medium-sized manufacturers at attractive valuations and offers economies of scale.
Quality matters for lab instruments, so Judges has pricing power.
Judges’ organic order intake for North America fell 18% year-on-year and the company said it expects market conditions there to remain ”challenging”.
But if its business model keeps working well as it scales, I think Judges is likely to continue paying (and hopefully regularly raising) its dividend for the long term.
