Is it time to buy this incredible FTSE dividend share?

I like owning FTSE 100 shares that pay me dividends. I like it even more if those dividends grow. I like it so much more still if that growth lasts for decades.

There is a caveat though. Although I like shares with great dividend track records what I want to buy are ones I think have great dividend prospects – without overpaying for them.

UK Dividend Aristocrat

That brings me to one FTSE 100 share that has an incredible record of raising its dividend annually, for over half a century. That makes it what we call a Dividend Aristocrat. Not only that, but I reckon the business has great potential both now and in the future.

The firm in question is Spirax (LSE: SPX). Many people have not heard of this FTSE 100 member, perhaps because it is an industrial business that sells to other companies. But from a commercial perspective, I think there is a lot to like about the business model – and what it means for dividend potential.

Resilient demand, proven model

Over its long existence, Spirax has honed a business model that concentrates on some specific engineering needs customers may have. For example, although steam may seem like the technology of a bygone era, it currently has a wide variety of industrial applications.

By selling and servicing equipment that can help customers realise those applications and those of various industrial fluids, Spirax has found a very lucrative niche.

When a client’s machine stops working, business interruption costs can be substantial. That gives Spirax pricing power. It also means that demand can be strong even during an economic downturn.

I’d happily own this share

Things may not always go smoothly. For example, one risk I see is softness in demand in the Chinese market continuing – and perhaps spreading to other markets. That could hurt revenues and profits in coming years.

But I would be happy to own the share for the long term – if I could buy it at the right price.

Not yet a bargain

The Spirax share price has been falling. Indeed, the share now costs 36% less than it did at the beginning of the year. Over five years, the decline has been 22%.

But does that mean it is now good value? Not necessarily. Spirax is trading on a price-to-earnings ratio of 25. That still looks expensive to me. I do not feel it offers me a sufficient margin of safety as an investor, should Spirax‘s business performance be worse than I hope.

For that reason, I do not feel now is the time for me to buy the FTSE 100 share for my portfolio.

I continue to like the business model and the dividend prospects it provides. But the price to me is not attractive. So I will wait and watch, in the hope that at some point I may be able to buy Spirax shares at what I regard as an attractive valuation.

This post was originally published on Motley Fool

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