Time to buy this FTSE 100 dividend growth stock after today’s record results?
With an unbroken history of annual dividend hikes that stretches back 39 years, FTSE 100 stock Halma(LSE: HLMA) has long been more than just a high-quality growth stock. And while no investment is devoid of risk, I think today’s record interim results from the global health and safety company are yet more evidence of how reliable a holding it has become for owners.
Robust performance
Revenue moved 16% higher to £585.5m over the six months to the end of September as a result of growth “in all major regions” but particularly good performance in North America. Highlighting “continued robust performances” in all of its segments (including “significantly improved profitability” in its Medical division), adjusted pre-tax profit increased 19% to just under £113m. Away from the numbers, Halma also purchased three businesses over the reporting period and a further two post-period end, continuing its acquisition-friendly approach to growth.
And the dividends? Once again, the £5bn cap saw fit to raise its interim dividend by 7% to 6.11p per share. True, the forecast 15.7p per share return for the full year (equating to a yield of just 1.15%) won’t make you rich overnight. But given that consistently rising dividends are usually indicative of a healthy company, there’s an argument for preferring businesses such as Halma over those offering far higher but stagnant (and ultimately unaffordable) cash returns.
Valued at almost 27 times expected earnings before this morning, Halma is undeniably expensive to buy — even more so after today’s positive response from the market. There’s also the impact of Brexit to consider, with the company already hinting it is likely to face some supply disruptions in the short term.
As long as you’re investing for years rather than months however, this shouldn’t be particularly concerning, especially given CEO Andrew Williams’s comment that order intake “continues to be ahead of both revenue and order intake for the comparable period last year”. He went on to state that Halma looks likely to deliver “more typical rates of constant currency organic growth in the second half”.
All told, this remains a superb company and one that will surely eclipse previous share price highs in time.
100% dividend growth
Another stock that’s not shy of increasing its bi-annual payouts has been Somero Enterprises(LSE: SOM). Having recently doubled (yes, doubled) its interim dividend, the manufacturer of laser-guided equipment is forecast to return a total of 24 cents per share in the current financial year, leaving it yielding 5.8% at its current price of 326p.
Despite its many attractions — including a strong net cash position ($20.7m), huge returns on the capital management invests and ongoing progress in developing new products — Somero was caught up in the flight from equities over October. Today, its stock is down almost 25% from the highs of 425p hit back in September, shortly after releasing a hugely positive set of half-year numbers to the market.
To recap, Somero traded in line with management expectations in the six months to the end of June. Revenue rose by 6% to $45m over the period on the back of “robust trading in the US and Europe” — two regions that now make up 83% of total revenues. Pre-tax profit climbed 13% to $13.6m.
When it’s considered that its stock now trades on a P/E of just 11 for the next financial year, I think Somero looks great value right now.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma and Somero Enterprises, Inc. 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.
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