With the FTSE 100 having a dividend yield of over 4% at present, it’s not especially difficult to find a range of high-yield shares. While they may offer impressive income returns today, long-term investors may be better off also considering stocks that are capable of producing high dividend growth in the coming years.
Such companies could not only deliver improving income returns, but may see their shares become increasingly popular among investors. With that in mind, here are two FTSE 100 dividend growth stocks that could deliver significantly higher returns than a Cash ISA.
Compass Group (LON:CPG) The first half results released by food services business Compass Group (LSE: CPG) on Wednesday highlighted the consistent performance the company offers. Organic revenue growth was 6.6%, driven by a strong performance in North America and Europe. It was able to maintain a relatively high margin while also absorbing the additional mobilisation costs in Europe from a higher growth rate.
The company continues to invest in its long-term future. It spent £370m in the period on acquisitions, with many of them in North America. It has also retained a disciplined stance on costs, with a focus on efficiencies helping to offset inflation and mitigate ongoing volume weakness in the UK and Europe.
With Compass Group having increased its dividends per share at an annualised rate of over 9% in the last four years, it’s a relatively consistent income share. Although its dividend yield of 2.3% may not be among the highest in the FTSE 100, the stock offers resilience and more dependable dividend growth than many of its peers. As such, it could post impressive total returns over the long term.
Coca-Cola (NYSE:KO) HBC Bottling company Coca-Cola HBC (LSE: CCH) has posted impressive growth in recent years. Its bottom line has risen by over 50% in the last four years, enabling it to pay a higher dividend during that time. In fact, dividends per share have increased at an annualised rate of over 12% during those last four years.
With a strong brand and the business having become increasingly efficient in recent years, it appears to offer a solid growth outlook. Although it has a dividend yield of 2.5%, its shareholder payout is covered 1.8 times by profit. This suggests there could be scope for continued dividend growth over the long run.
Furthermore, Coca-Cola HBC could offer capital growth potential. The company is forecast to post a rise in earnings of 17% in the current year, followed by growth of 11% next year. With the stock trading on a price-to-earnings growth (PEG) ratio of 1.7, it could offer good value for money compared to the wider FTSE 100.
As such, now could be a good time to buy it for the long term, with its risk/reward ratio highly appealing.
Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019