Industrial supplier Diploma announced its finals today (https://goo.gl/j6zOXY), sending its shares up 1.2% to 910.5p in early trading. Revenues were up 15%, profit before tax was up 5%, free cashflow was up 46%, and total dividends were up 10%. So everything is going in the right direction.
The Chief Executive commented:
Despite the current macro-economic uncertainty in the global environment, the Board remains confident that the Group will continue to make further progress in the coming year from a combination of steady GDP plus organic growth and a strong and successful acquisition programme.
Dividends have grown by 16% pa over the last 5 years, and more that quadrupled over the last decade. According to Stockopedia, its average ROCE over the last 5 years was 23.9%. It has next cash.
DPLM is part of my LTBH (long-term buy-and-hold) portfolio due to its combination of high ROCE, conservative financing, and steady increase of dividends. It is a “steady compounder”.
DPLM is rarely mentioned on the bulletin boards due to its lack of excitement value. Lack of bulletin board interest is usually considered a good sign. It does not appeal to value investors, as it is not a value share. It does not appeal to momentum investors, as you do not expect much momentum out of it. It is not a high-growth speculative stock which attracts the growth investors. It is not a big-cap, and it is not a small cap. So it slips under everyone’s radar.
And yet there it sits, quietly chugging along each year, pumping out ever-increasing dividends.
Readers with a good memory may recall that I sold out of DPLM a few years ago because the valuation looked a bit strong. It was a decision I rued. I bought back in nearly a year ago. The shares are up around 31% over 1 year, handily beating the Footsie, which is up 7% over the same period.
It is the kind of share that you have to resist selling. Stockopedia shows that its PE ratio is 19.4, which I think is at the upper end of what you can safely pay. It has a momentum score of 93, which is good, but I think it may have to trade sideways for awhile to let fundamentals catch up with valuation. It is just not a whizz-bang stock that attracts daft valuations.
I hold, and am happy…
