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I’m a firm believer that the easiest and safest way to build wealth over time is to invest in high-quality FTSE 100 blue-chip stocks that prioritise growing shareholder returns. So when I unearthed a business that has grown its dividend per share at a compound annual growth rate of 9.5% for over three decades, my interest levels perked up.
Distribution powerhouse
The stock is international distribution and services specialist Bunzl (LSE: BNZL). This business distributes predominantly goods-not-for-resale including packaging and non-food consumables. Its customers range from large retailers to small independent outlets and restaurants.
The stock hit the headlines earlier in the year when it issued a rare profit warning, after revenue and operating profit declined in North America, its biggest market. A combination of poor strategy execution, deflation and a large customer loss, led to the share price losing a quarter of its value in a day.
Misfiring strategy
Over the past couple of years the business has pivoted toward growing its portfolio of higher-margin, own-branded, sustainable packaging solutions. These include the likes of ecosystems, verive and sustain. In 2024, such products accounted for 14% of total sales, up from 5% the previous year.
Complementing this pivot, it changed the organisational structure from a predominantly branch-based one to a sales and operational model. Hiring a centrally-managed professional sales team worked well for large national accounts. However, it turned out to be completely the wrong model for managing smaller, local accounts.
Centrally-managed sales teams found themselves being price undercut by smaller, local and more nimble competitors.
Large accounts have also suffered because of poor strategy execution. The business also disclosed it had lost a high-margin customer, although it failed to name it.
Dividends
The falling share price has pushed the trailing dividend yield up to 3.1%. This is considerably higher than its long-term average of 2.5%.
The company might not be a big dividend payer but it’s long-term growth that matters more to me. Last year, it hiked the dividend per share by 8.2%. Dividend cover’s also comfortably above two times earnings. This provides the business with plenty of headroom to increase payouts again this year.
Acquisitions
Over the decades the company’s grown from a small, regional player into an international powerhouse through an aggressive acquisitions strategy. In 2024, 13 new businesses were swallowed up into the Bunzl brand, at a cost of £883m. The largest of these was UK-based omni-channel distributor of catering equipment, Nisbets. It also acquired its first business in Finland, Pamark.
Such an acquisition binge doesn’t come without risk. For example, soon after buying Nisbets, its automated warehouse flooded. However, the fragmented nature of the industry provides Bunzl with an extraordinary pipeline of further growth opportunities.
Across all its key sectors, long-term structural growth drivers remain in place. Across healthcare, this includes the growth of care at home and ageing populations. In grocery, it’s the push for sustainable packaging and the outsourcing of non-food essentials. And in food services, this includes the growth in takeaways and home deliveries.
I view the recent company woes and share price weakness, as a stock to consider. It certainly is on my watchlist for when I have available free funds.
