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The best type of passive income is surely the one that grows over time. Applied to the stock market, this occurs when companies manage to raise their dividends year after year. Today I am looking at two examples of the FTSE 250 who have managed to do just that.
Tasty semiannual numbers
Mid-Cap Meat Supplier Cranwick (LSE: CWK) may not be a glamorous business. But it has been a brilliantly reliable source of growing dividends for shareholders. In fiscal 2019, the total payout amounted to 55.9 pence per share. In FY24, it was 90 pence per share.
Based on the latest set of interim results, I think this situation looks set to continue.
Revenue rose 6.1% to £1.33bn in the six months to September 28. At £95.8m, adjusted profit before tax was just over 17% higher.
Part of the reason Cranswick continues to post higher numbers (and increase dividends) is due to its growth strategy. As a result of continued investment, the company has the largest pig farming business in the UK. It also continues to expand its poultry division, which now represents 19.5% of total sales. The recent foray into pet foods also seems to be going well.
Why the fall?
Despite today's encouraging update, shares have fallen nearly 5% in trading.
At least part of this could be due to management stating that the outlook for the remainder of the financial year (ending March 29) was in line with market expectations. With the stock already trading at 19 times forecast earnings, investors were likely hoping for an improvement in guidance.
Still, there's nothing in today's statement that causes me any real concern (although the growing popularity of plant-based protein sources is a potential risk I'm watching for). Consumer demand appears strong and the company's holiday order book is “strong“.
Tellingly, management has also decided to increase the interim payment by 10.1% to 25p. That screams confidence to me.
At just around 2%, Cranswick's forecast dividend yield might be average, but this is arguably offset by the excellent long-term performance of the £2.8bn cap.
If the stock continues to lose value in the coming weeks, I may give up.
Back on the road
Another mid-cap company with an excellent track record of growing dividends is the storage giant. Secure store (LSE: INSURANCE). As with Cranswick, I think this will continue.
Revenue Performance “improved” in the fourth quarter, allowing management to declare that the company had “returned to general growth”in FY24. This despite small business demand being more subdued than in 2023.
The shaky economic context aside, trade has also been “stable”across the English Channel in France.
difficult times
As things stand, the stock is yielding 4%. That's more than you'd get by simply buying a standard fund that tracks the performance of the FTSE 250. I also like that Safestore has 26 more stores in its development portfolio as it slowly expands into continental Europe.
That said, I am aware that the housing sector could suffer further pain in the short term if inflation continues to rebound, prompting the Bank of England to suspend interest rate cuts. In fact, this goes some way to explaining the nearly 13% drop in the share price over the past month.
For this reason, I'll keep Safestore on my watchlist for now.
