5 Shares For Your ISA: Fuller, Smith & Turner

Published in Company Comment on 23 March 2012

This family-run pub group offers a reliable record of shareholder returns.

Each day this week we're highlighting a share you may wish to consider for your ISA. Today we turn our attention to Fuller, Smith & Turner, a small-cap pub group that has lifted its dividend every year since 1974.

Not all smaller companies are high risk. Some have records of reliability and superb shareholder returns that put many of their larger brethren to shame. Fuller, Smith & Turner (LSE: FSTA) is a case in point.

The brewer of London Pride and other notable ales, with an estate of pubs and hotels across the south of England, is a minnow alongside the great whales of the FTSE 100 but has been everything a long-term investor could wish for.

Vintage Ale

Fuller, Smith & Turner was founded in 1845 and remains an independent family-controlled business, with descendents of the founders retaining a substantial shareholding and occupying key positions on the board of directors.

As with many such firms, the directors run the business as stewards for the next generation. That means patiently and conservatively, so that the business grows steadily in prosperous times while always being positioned to weather any economic downturn.

The success of Fullers' approach to business is reflected in its dividend history. The company has increased its dividend every year since 1974, compound annual growth of 13% taking the annual payout per share from 0.14p to 11.8p.

Chiswick Bitter

Rumours of the death of the British pub have been greatly exaggerated. In Fullers' case, at any rate, there's every reason to suppose that shareholders could be rewarded as handsomely in the next four decades as they have been in the last.

There's still plenty of room for Fullers to expand in its London and south of England heartland, particularly as the recession has hit many weaker pubs and pub groups hard, leaving quality operators with less competition.

Another driver for Fullers' future growth should be its beer export business. One in six barrels that roll out of the company's Chiswick brewery is now shipped abroad to one of 62 countries around the world.

Demand continues to be strong in developed markets, such as the USA and Canada, but the company is particularly excited about expanding its reach further into Russia, the Baltic states and the Far East.

Brewer's Reserve

On an earnings basis, Fullers' 720p shares are not what analysts would call cheap. However, the firm looks not unreasonably priced to me on an assets basis, because its high-quality property estate is in the books at a valuation made as long ago as 1999.

In addition to being a fine, cask-aged investment, there are perks for shareholders who own more than 250 shares: 10-50% reductions on Fullers' hotel prices and discounts in the Brewery Store!

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> G A Chester owns shares in Fuller, Smith & Turner.

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Comments

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lameuse 23 Mar 2012 , 1:39pm

I totally agree with G A Chester. FSTA was the first share I ever bought in 1985 and my only regret subsequently was not buying more at the time as my investment is now worth 13 times more!
I am also thrilled to see Fuller's taking over some very good quality pubs all over Southern England and earlier this week, they opened the country's biggest railway station pub at Kings Cross.

Dozey1 23 Mar 2012 , 9:58pm

A PEG of over 2.0, p/e of 18.5, yield of less than 2%. Why does the author believe these figures (From Sharescope) are not worth sharing with his readers?
FSTA is a wonderful outfit, but has always seemed too expensive to me unfortunately.

lameuse 30 Mar 2012 , 7:41pm

Dozey1 - I would agree they are a little pricey right now but if you look at chart for last 10 years, there have been lots of brilliant buying opportunities. If you are buying for next 20 years, you can buy at almost any price.

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