Ask 10 investors which share in the FTSE 100(INDEXFTSE: UKX)is the most reliable and you might get 10 different responses. Some might choosea utility company for its steady earnings stream. Others might opt for a big pharmaceutical,since medicine will always be needed. Even a relatively volatile sharelike oil giant Royal Dutch Shell might be selected, if only for the fact that it hasnt cut its dividend since World War II. For me, however, a front-runner wouldbe distribution and outsourcing provider, Bunzl (LSE: BNZL). Heres why.
Enviable track record
For evidence of the 8bn capsreliability, take a look at the performance of its shares over the last five years.
Priced at 795p in August 2011, Bunzls shares now trade for 2,416p, a rise of over 300%. All this from moving paper cups, gloves and food packaging around the globe.
This rise in value hasbeen almost boringly predictable thanks to net profit increasing every year. Return on capital employed (a decent indicator of a companys quality) has stayed fairly constant at around 16% during this period. And while Bunzls bi-annual payouts arent huge(1.7% yield), its 23-year history of consistently raising dividendsshows why its held in such high esteem.
Contrast this with the fortunes ofmany of the FTSE 100s biggest companies over the past year or so as their investorsworried over the possibility of cuts to the annual payouts. It doesnt matter how large a dividend isoffered if the chances of it being sacrificed are high.And while investing in, for example, UK housebuilders at the height of the financial crisis or, more recently, during the initial fallout from Junes referendum may have served investors well, itinvolved considerably more risk. Higher risk usually means the possibility of higher returns but, given the choice, Id gofor boring but consistently profitable and geographically diversified companies every time.
Decent interims
Todays interim results show little sign of Bunzl slowing down. Group revenue for the first half of 2016 increased to 3,446.8m from3,135.2m the year before, with operations in Continental Europe performing particularly well. Adjusted operating profit was 235.1m, 13%higher than 2015s 208.4m. Adjusted earnings per share were 46.2p, an increase of 12%. All this during a period that saw the company face challengingmacroeconomic conditions and the retirement of long-standing CEO Michael Roney. Bunzls excellent history of raising dividends also continues with an increase of 11% in the interim dividend to 13p.
Despite initially rising,the share price has now retreated to where it started the day,leaving the company on a price-to-earnings (P/E) ratio of 23.
Futureprospects
Improved revenueand reliable dividends are all very wellbut can they continue? Quite possibly. In addition to todays strong set of results, Bunzl also announcedthe acquisition of three companies, bringing the total to eight in 2016 so far. Two of these are based in Canada (hygiene product suppliers Plus II and Apex) with the other in Hungary (disposable food service item supplier Silwell), further underlining the companys global presence.
It doesnt look like things will stop here either. In addition to stating that Bunzl would continue to invest in IT and digital projects,CEO Frank van Zanten also reflected that the company has an active pipeline of opportunities for further acquisitionsand expectsto complete more transactions during the rest of the year.
Calling all growthhunters
No investment is ever completely risk-free, even when it involves buying slices of companiesthat have performed well for several years. Nevertheless, Bunzl’s superbtrack record, today’s positive results and the likelihood of decent, steady growth in the future suggests thatthe company is a highly attractive long-term investment.
DoesBunzl’s reliabilitymean it should be the only share you consider investing in? Of course not. Sinking your cash into just one company, regardless of how it has performed over the last few years, would be decidedly unFoolish. Being diversified is key in attempting to build wealth over the long term, whether you’re looking for solid dividend payers or fast-moving growth stars.
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Paul Summers owns shares in Bunzl. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.