On a busy day for results, directors are buying shares and other stocks offer ‘an attractive entry point’.
Dividend growth at FTSE 100-listed DCC (LSE:DCC) rolled into its 27th year today as the diverse support services business gave another of its trademark resilient performances in annual results.
The heating oil-to-healthcare conglomerate said all four of its divisions grew operating profit in the year to 31 March, despite facing unprecedented challenges over the past period.
Adjusted earnings per share (EPS) lifted 6.6% to 386.6p, meaning that the final dividend of 107.85p scheduled for payment to shareholders on 22 July is 2.4 times covered.
Following a particularly strong working capital performance and free cash flow of £687.8 million, the latest award by the Dublin-based company lifts its total dividend by 10% to 145.27p, extending an unbroken record of growth lasting 27 years compounding at 13.9%.
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Shares peaked at 6,600p in March but have reversed since then, with the blue-chip stock today 90p lower at 6,000p despite DCC's confidence that 2022 will be another year of profit growth.
At current levels, analysts at UBS and Jefferies believe the shares offer an attractive entry point. Jefferies noted that 2021 EPS was 3% ahead of consensus and free cash flow “far ahead” of its forecasts as the broker reiterated a 7,000p price target.
UBS is even more optimistic at 7,770p after praising DCC"s “diverse and resilient business model”, with particularly strong performances in the healthcare and technology divisions.
The lacklustre response to DCC results came as blue-chip investors piled into some of London's better-known stocks as inflation fears continued to fade to leave the FTSE 100 index 34.5 points higher at 7,067.35.
Today’s big movers
BT Group (LSE:BT.A) shares were among those making progress, with the telecoms giant once again testing the 170p threshold as optimism continues to build following last week's annual results.
In a session when Vodafone Group (LSE:VOD) traded sharply lower, confidence has been aided by CEO Philip Jansen this week buying £2 million of BT shares despite the price being at a high for the pandemic.
The company, whose Oxbox manufacturing facility is one of several sites in Oxfordshire employing more than 670 people, has doubled revenues expectations to more than £100 million by the end of 2021, meaning significant growth in underlying earnings.
CEO John Dawson said: “We are delighted to be a key supplier of the vaccine and the group is proud to be part of this world-leading vaccination project that is saving many lives."
Shares in the group, which also has partnerships with Novartis (SIX:NOVN), Bristol Myers Squibb (NYSE:BMY) and Orchard Therapeutics (NASDAQ:ORTX), rose to 1,110p, the highest level in more than a decade.
Mid-cap shares in focus
Enterprise software firm Micro Focus took another tentative step towards reclaiming its place in the FTSE 100 index when it said it traded ahead of expectations in the six months to 30 April.
CEO Stephen Murdoch, who is part way through a turnaround targeting margins towards the mid-forties percent and annual free cash flow of at least $700 million, said the period saw further solid progress in most areas.
Revenues were 5% lower in challenging conditions, but investors should be pleased that the adjusted margin of 36% was ahead of City expectations. Shares jumped 21.8p to 493p, compared with 587p in March and a pandemic low of 211p in November.
Micro Focus had been above 2,500p in 2017, prior to an acquisition spree that culminated in the ill-fated purchase of the software segment of Hewlett-Packard Enterprise for $8.8 billion.
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Promotional products firm 4imprint is another stock on the comeback trail after rising 130p to 2,430p on the back of a better-than-expected trading update. The Manchester distributor of branded mugs and corporate merchandise said order intake in April was running at 80% of 2019 levels, compared with 65% in January and February.
Food producer Cranswick rose 192p to 3,906p after reporting a positive start to the new financial year, having delivered growth in earnings per share of 27% to 199.3p in the 12 months to 31 March. Like DCC, the company is on a dividend roll after increasing its full-year pay-out by 15.9% to 70p a share for the 31st year of unbroken growth.
The easing of lockdown restrictions has also boosted the outlook at Britvic, where adjusted earnings per share fell 20% to 15.2p in the six months to 31 March. It has ramped up investment to capitalise on near-term market opportunities and also expects the sale of on-the-go products to regain momentum.
Shares in the company, whose portfolio includes Robinsons, Tango and J2O, rose 30.5p to 949.5p after reinstating the half-year dividend with 6.5p a share for payment on 7 July.
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