Two FTSE 100 dividend growers suffer mixed fortunes

These blue-chip big hitters are moving in opposite directions after latest updates, reports Graeme Evans. Here's why, and where analyst think they're going next.

Johnson Matthey and Sage - two FTSE 100 stocks with proud records of dividend growth - got an emphatic answer from investors today about which one of them has been oversold in the recent market turbulence.

On results day for these stalwarts of London's blue-chip index, the clear winner turned out to be Johnson Matthey as the speciality chemicals and sustainable technology firm reassured investors with upgraded full-year guidance.

Shares jumped 8% to draw a line under a disappointing few weeks for Johnson Matthey as fears over the health of the automotive industry contributed to a shares slump of 23% since the start of October.

There's still a long way back to this summer's record high of 3,873p, but Morgan Stanley certainly thinks it can be done having reiterated its 3,900p price target and "overweight" rating in the wake of today's half-year figures.

Source: TradingView (*) Past performance is not a guide to future performance

Sage, meanwhile, has continued its miserable run of form in 2018. The stock is now down 35% with today's annual results triggering a fresh 4% slump for holders of the accounting software company.

Organic revenues growth of 6.8% for 2018 came in slightly below April’s lowered expectations of 7%, as well as 8% prior to the downgrade. 

And as the business accelerates the pace of transition towards cloud-based subscription services, Sage warned its organic growth rate may decrease in the short-term. It is also committing £60 million in investment on products and in its Software as a Service systems, tools and training.

Analysts at Morgan Stanley welcomed the greater spending by CEO Steve Hare, even though this will mean operating margins are likely to be between 23% and 25% in the 2019 financial year, compared with 27.8% in today's results.

They said:

"We believe this is a clear positive for the mid-long term of the group — although investors will also want to be reassured that the investment can drive a faster pace of innovation."

The bank believes that a 500p share price can be supported, adding that Sage's pledge to maintain the dividend in real terms was another positive.

Source: TradingView (*) Past performance is not a guide to future performance

Sage has increased its dividend every year since 1999, with shares currently yielding in the region of 3%. That's similar to Johnson Matthey, which today increased its well-covered interim dividend by 7% to 23.25p.

The relief for investors came in guidance for the rest of the financial year, with the company now steering towards the upper end of its predicted mid to high single digit growth range.

Earnings per share was 9% higher at 109p in today's results, about 3% higher than consensus and compared with current full-year forecasts of 7.4%

UBS remains cautious, however, with a "sell" recommendation and price target at 3,000p.

They said:

"Growing cancellation rates in truck orders and continuing weak passenger car sales are the main reasons for our caution for the second half. EPS will also be impacted by higher interest charges due to higher leasing of metal."

Johnson Matthey said its Clean Air business, which makes products that drastically reduce automotive emissions, continued to grow strongly in the half year. Sales rose 11%, which is well ahead of global vehicle production.

Its Efficient Natural Resources division also achieved a result 13% ahead of consensus, helped by improved efficiency and higher precious metal prices.

The company is also involved in the development of long-range pure battery electric vehicles through its eLNO ultra-high energy density material.

 *Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.