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Stock of the week: Compass

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Graham Spooner, investment research analyst at The Share Centre, picks the world's largest contract caterer, Compass, as stock of the week.

For those unaware, Compass is the world’s largest contract caterer, providing food and other services to clients in 50 countries. Its customers are spread across workplaces, schools and colleges, hospitals, leisure facilities and remote environments. It also runs coffee shops, vending machines and bakery outlets.

We’ve picked it as this week’s share tip of the week because the group is seeing a boost from a healthy new contract pipeline combined with the group benefitting from the trend by companies to outsource catering in order to cut costs. Moreover, investors should also appreciate that it is currently experiencing good sales growth in some of its biggest markets, particularly America and some emerging market operations

The defensive nature of the business is one of its main attractions because it is less likely to be susceptible to economic downturns. Worth noting is that a present, Compass looks financially sound and is generating enough cash which enables it to pay special dividends.

The dividend yield is 2.13% and is forecast to grow above inflation.

We recommend the FTSE 100 company as a ‘buy’ for long term, lower risk investors seeking a balanced portfolio.

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