This FTSE 100 dividend superstar is up 18% in a month – time to consider buying?
Forgotten FTSE 100 hero Croda International (LSE: CRDA) has staged a remarkable comeback, jumping 18% over the last month.
That’s a long-awaited reversal after a dire run of form. However, despite that surge, the Croda share price is still down 35% over 12 months and 54% over three years.
Its fall from grace and potential to rise again intrigued me. I reviewed the stock in January, twice in February, and again in March.
Croda was once a shining star, supplying high-performance chemicals used in everything from sun creams to vaccines.
It was a big pandemic winner. Demand for its lipids soared as vaccine makers stocked up. But when Covid passed, customers had too much inventory.
Croda’s board described the subsequent destocking process as “prolonged”. Long-suffering shareholders may have earthier words for it.
Results start to turn
Yet, through it all, Croda has continued doing one thing brilliantly. It has increased its dividend every single year since 1991.
Since 2008 the ordinary dividend has grown by an average of 12% a year. That kind of record earns the stock dividend superstar status, at least in my book.
I saw its potential, but I didn’t buy. Despite its troubles, Croda wasn’t exactly in deep-value territory, with a price-to-earnings ratio of almost 23, well above the FTSE 100 average of around 16.
The yield was modest, below 2%, and dividend growth had slowed. More importantly, I felt it hadn’t yet hit recovery speed.
That’s changed. On 23 April, Croda reported an 8% rise in Q1 sales to £442m. All three business units grew, with consumer care up 8% to £255m and life sciences up 10% to £134m.
The board kept its full-year profit outlook intact. Then Donald Trump gave it another lift.
A mood shift in markets
With Trump rolling back on his tariff threats and striking a trade deal with the UK, FTSE 100 stocks have climbed almost across the board. Croda has been one of the biggest movers.
It’s still pricey, trading on a P/E of 22, but the yield has crept up to 3.5%. The 14 analysts with one-year forecasts have a median target of 3,777p. That’s just over 20% above today’s price. Factoring in the yield, that would deliver a 15% total return.
That suggests there is scope for growth, but as ever, no guarantees.
Dividend depends on cash
This worries me. In 2024, Croda paid out more in dividends than it generated in free cash. Some will see that as a sign of the board’s commitment to rewarding shareholders. Others may worry it means the cash isn’t there.
Of 16 analysts covering the stock, six call it a Strong Buy. Eight say Hold. Only one says Sell.
After the latest surge, there’s a chance that markets may pause for breath, and Croda might give up some of its gains.
Investors considering buying this stock should watch carefully, to see if the last month was a knee-jerk response to Trump or the start of something more enduring.
Croda may appeal to those who value steady, long-term dividend growth over chasing the highest yield today. One thing hasn’t changed. I still can’t get excited enough to buy it myself.
The post This FTSE 100 dividend superstar is up 18% in a month – time to consider buying? appeared first on The Motley Fool UK.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc. 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.
