Growth is an important aspect of value, and progressive growth is especially important to defensive value investors like me.
I prefer to measure progressive growth by counting how often a company’s annual dividends went up over the past 10 years. Because dividends aren’t the whole picture I also do the same for earnings and revenues. I also use book value instead of revenue when I’m valuing financial companies.
This gives me a reasonably good idea of how steady or progressive a company’s growth has been over the medium to long term, which I think is much more useful than looking back just a year or two.
So which companies have had the most progressive growth of dividends, earnings and revenues/book value over the past decade?
All is revealed in the table below:
My term for progressiveness is “quality”, where 100% would be scored by a company that had grown its dividends, earnings and revenues in every year of the last decade.
As you can see all of these companies have a growth quality score of more than 96%, while the FTSE 100 has a growth quality score of just 58%.
This is a group of companies that have ridden out the financial crisis significantly more successfully than most companies.
The average dividend yield of these stocks is 2.7%, somewhat below the 3.5% on offer from the FTSE 100, but that’s what I’d expect from companies that have grown so consistently. Quality comes at a price after all.
They also look pricey relative to earnings as their average PE ratio is 20.7. That’s far above the FTSE 100’s PE of 13.6. Generally, I use PE10 rather than the standard PE ratio, and here the average PE10 for these stocks is 32.1; also well above the large-cap average which has a price to 10-year average earnings ratio of just 14.2.
On a more positive note, their growth rate is much higher than the 2.2% a year growth managed by the FTSE 100, and on average these companies have been growing at around 15.3% a year over many years.
So there you are; the 10 most progressively growing companies in the UK market. If you’re looking for progressive dividends, or if you’re just after quality companies in general, hopefully, you’ll find something of interest in that list, if only to add to a watchlist.
Disclosure: I own shares in Admiral and MITIE and they’re both holdings in the UKVI model portfolio.