FTSE 100 engineering group Halma (LSE: HLMA) has delivered record revenues and profits for each of the last 15 years.
This often-overlooked group is made up of about 50 businesses in 20 countries. Each of these firms operates in a specialist niche and makes safety-related equipment, such as fire detection and suppression systems, water quality testing equipment and medical devices.
Today's results show no sign that progress is slowing. Sales rose by 12% to £1,076.2m, while adjusted pre-tax profit climbed 10% to £213.7m. Shareholders will enjoy a 7% pay rise thanks to a full-year dividend of 14.7p per share.
More of the same, please
Halma's dividend has risen by at least 5% every year for the last 38 years, making it one of the most reliable dividend stocks you'll find anywhere.
One of the secrets of its long-lasting growth has been its business model. Although organic growth is important, the firm also relies on making regular small acquisitions. These are selected within markets that offer long-term growth and a high return on capital employed.
Very few companies manage to execute this kind of strategy so successfully. But Halma's long track record of growth suggests to me that it has excellent management and strong processes in place to guide its growth. I'd be comfortable investing in this business, even though I'm usually wary of acquisition-led expansion.
Is the stock a buy at this price?
The share price has risen by 190% over the last five years. Today it trades on 29 times 2019/19 forecast earnings, with a forward yield of just 1.1%.
I'd prefer to wait for a market correction to buy these shares. But I don't see any reason why the firm shouldn't continue to pump out reliable earnings and dividend growth for another 15 years. If you're looking for quality stocks to hold forever, I'd add Halma to your shopping list.
A stock I'd buy today
One share I'd consider buying today is quality assurance specialist Intertek Group (LSE: ITRK). This FTSE 100 firm employs 43,000 people in 1,000 locations in 100 countries. It supplies a wide range of testing, certification, inspection and consulting services to most major industries.
It too makes regular acquisitions. The latest of these was a cyber security specialist based in Malaysia. Prior to that, it was a laboratory testing firm in Colombia.
The group's complexity could be a risk, as it might become hard to ensure that all parts of the company are operating efficiently and in harmony. But Intertek's consistent growth suggests to me that management controls are strong and that the group's structure works well.
I like these numbers
This business is very profitable. In 2017, it generated a return on capital employed of 29% and an operating margin of 15%. Earnings per share have risen by 10% per year since 2012.
Cash generation is very strong, enabling the group to fund acquisitions and dividends while keeping debt levels low.
The last-seen share price of £57.50 gives the stock a 2018 forecast price/earnings ratio of 29 but the dividend yield is low, at about 1.5%. Yet I'm confident that demand for the group's services should continue to grow for the foreseeable future.
Like Halma, I think this would be a great stock to buy during a market sell-off. But for long-term investors, I think the shares also deserve a buy rating today.
Our top analysts have highlighted five shares in the FTSE 100 in our special free report "5 Shares To Retire On". To find out the names of the shares and the reasons behind their inclusion, simply click here to view it immediately with no obligations whatsoever!
Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma and Intertek. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.