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He Bunzl (LSE:BNZL) share price has risen a whopping 88% over the last decade. And while it's down since early 2024, the company is making a comeback as sales and margins show signs of recovery.
I'm looking for the best passive income stocks to buy in July. And Bunzl – with its 31 consecutive years of dividend growth – is near the top of my shopping list.
In fact, after a great trading statement today (June 27), he may finally be about to pull the trigger. This is why.
A stable performer
Support services giant Bunzl sells a wide range of essential products to a variety of sectors around the world. This includes food packaging for supermarkets, disinfectants for cleaning companies, gloves for medical professionals and hard goods for construction companies.
Simply put, their provision of everyday goods and services helps the world go round. As a result, earnings tend to be stable at all points in the business cycle, which in turn gives Bunzl the strength and confidence to deliver that long-term dividend growth I mentioned earlier.
Profit improvement
But the company hasn't had its way lately. Weak trade in North America has impacted revenues and margins, and this remains a threat if interest rates fail to retreat significantly from current levels.
Bunzl confirmed today that sales are likely down 3-4% in the first half, or 0-1% with stablecoins. He said that “Volume reductions and deflation in our US business.”will probably reduce income.
However, a strong rebound in operating margins is helping to offset this problem. Indeed, Bunzl said margins are now expected to exceed 2023 levels, which in turn led the company to raise its full-year earnings forecast.
He said effective margin management and profit from acquisitions mean that “Good margin growth is expected in North America in the first half of the year and very strong margin growth in the UK, Ireland and the rest of the world..”
Bunzl also said that he now hopes to announce “robust revenue growth”In constant currencies for the entire year.
Dividend growth
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2023 | 68.3p | + 8.9% | 2.2% |
| 2024 | 72p(m) | +5.4% | 23% |
| 2025 | 76p(m) | +5.6% | 2.5% |
| 2026 | 79.3p (f) | +4.3% | 2.6% |
So what does this update mean for future dividends? Well, City analysts expected payments to continue rising ahead of Thursday's update, as shown in the chart above. Today's news will surely reinforce your bullish estimates.
On the downside, brokers believe dividends will grow at a more modest pace than in previous years. Payouts on Bunzl shares have increased at a compound rate of about 9% since 1992.
However, dividend growth is expected to outperform the FTSE 100 overall. For example, AJ Bell It projects a modest 2.3% increase in cash rewards (including special dividends) by 2024. This is less than half the growth rate that brokers anticipate for Bunzl's dividends this year.
And if the business can maintain its recent momentum, analysts could even improve their dividend forecasts for the short and medium term. I think dividend hunters should take a close look at Bunzl stock right now.
