Portfolio shares: DCC's ROCE fixation and 27-year dividend history appeal to me

Roland Head -

Disclosure: Roland owns shares in DCC.

This is the first of a series that will introduce the stocks in my quality dividend model portfolio.

FTSE 100 firm DCC (LON: DCC) describes itself as an "international sales, marketing and support services group". More usefully, I think DCC can be described as a conglomerate with the following characteristics:

  • Core skillset: Distribution
  • Markets: B2B and B2C
  • Sectors: Energy, healthcare/beauty, and technology
  • Geography: UK, Ireland, USA, and western Europe

This Irish company is below the radar for many investors, despite its FTSE 100 membership. But I think DCC has a track record which deserves respect and makes it an interesting alternative to better-known Bunzl.

DCC floated in 1994. In the 27 years since then, it's delivered a total shareholder return of 6,640%* and a compound average annual dividend growth rate of 13.9%*. Perhaps not coincidentally, DCC's reporting includes a welcome emphasis on return on capital employed (ROCE) and free cash flow. (*DCC statistics)

I think this business has the potential to continue growing at an attractive rate, while providing a high-quality dividend.

DCC is a member of my quality dividend model portfolio and a holding in my personal portfolio. In this review I'll explain how this business makes money and why it's one of the highest-scoring stocks in my dividend screening system.