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The best type of income is definitely the type that grows over time. When applied to the stock market, this happens when companies are able to raise their dividends year after year. Today, I look at two examples from FTSE 250 who have been able to do just that.
Tasty semi-annual numbers
Average meat supplier Cranswick (LSE: CWK) may not be a glamorous business. But it has been a surprisingly reliable source of increasing shareholder returns. In FY19, the total payout came to 55.9p per share. In FY24, it was 90p per share.
Based on the latest set of interim results, I think this form looks set to continue.
Revenue rose 6.1% to £1.33bn in the six months to 28 September. At £95.8m, adjusted pre-tax profit was up just over 17%.
Part of the reason Cranswick keeps posting high numbers (and growing profits) is down to its growth strategy. As a result of continuous investment, the company has a large pig farming business in the UK. It also continues to expand its poultry division which now accounts for 19.5% of total sales. Recent pet food consumption seems to be going well too.
Why fall?
Despite today’s encouraging update, shares fell nearly 5% in trading.
At least some of this may be due to management saying that the outlook for the financial year (ending March 29) was in line with market expectations. Given that the shares were already trading at 19 times earnings, investors may have been hoping for an improvement in guidance.
However, nothing in today’s statement gives me real cause for concern (although the growing popularity of plant-based protein sources is one of the potential risks I’m looking at). Demand from consumers appears to be strong and the firm’s Christmas order book is “strong“.
Sadly, management also opted to increase interim pay by 10.1% to 25p. That screams confidence to me.
At just 2% or so, Cranswick’s climate share yield may be average but this is arguably balanced by the long-term efficiency of the £2.8bn cap.
If the shares continue to lose value in the coming weeks, I may hold back.
Get back on track
Another mid-cap with a good track record of growing profits is the self-storage giant Safestore (LSE: SAFE). Like Cranswick, I think this look will continue.
Revenue performance “the better” in Q4, allowing management to announce that the company “returned to general growth” in FY24. This is despite the fact that demand for small business customers has been significantly reduced since 2023.
Apart from the bad economic situation, trade has also been “stable” on every channel in France.
Hard times
As things stand, the stock is yielding 4%. That’s more than I could get by just buying a standard fund that tracks the return of the FTSE 250. I also like that Safestore has a lot of 26 stores in its development line as it slowly expands into Continental Europe.
That said, I recognize that the real estate sector could be set for short-term pain if inflation continues to jump, prompting the Bank of England to hold off on interest rate cuts. Indeed, this goes some way to explaining the stock’s 13% decline in the past month.
For this reason, I am keeping Safestore on my watch list for now.
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