These 2 unsung heroes have blown the FTSE 100 away

These star FTSE 100 (INDEXFTSE: UKX) performers should continue to shine, says Harvey Jones.

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The following two unglamorous UK blue-chips may have escaped your attention but they have blown the FTSE 100 away over the past decade, and may continue to set the pace. You cannot afford to overlook them any longer.

Finding its way

Compass Group (LSE: CPG) has seen its share price rise by an astonishing 331.8% over the last decade, according to figures from online platform AJ Bell, against 12.8% for the FTSE 100 as a whole. Its total return with dividends re-invested is even more amazing at 479.1% against 64% for the FTSE. That is thanks to its progressive dividend policy, which has seen the dividend increased every year for the past decade, at an impressive annual compound rate of 11.4%. Compass Group really has a sense of direction.

The food services company has had a good 12 months as well, its share price rising 18% in that time. It has benefitted from its global diversification which sees 90% of company earnings generated outside of the UK, giving it a real boost from the post-referendum collapse in sterling. However, with the pound now climbing, that process could go into reverse.

Food, glorious food services

This massive business, with a market cap of £25bn, looks like an attractive safe haven to me, the problem is that plenty of other investors think so too, which has driven up the valuation to a heady 25 times earnings, while strong share price growth has driven the yield down to 2.11%. However, policy is progressive on this front, with the last full year seeing a 7.8% increase in the dividend payout from 29.4p to 31.7p.

The world’s largest contract caterer, which operates in around 60 countries, still has positive growth prospects with earnings per share (EPS) expected to rise 19% in the year to 30 September, and another 7% in the subsequent 12 months. It isn’t cheap, but there is a tasty reason for that.

Sage words

Business management software specialist The Sage Group (LSE: SGE) has also given the rest of the FTSE 100 a hard time over the last decade. Its share price grew 156.4% over that time, or 245.5% with dividends reinvested, thanks to its impressive annual compound dividend growth rate of 7.3%.

Share price growth has disappointed lately, hampered by management warnings that 2017 would start slowly, although growth is expected to accelerate throughout the year and into 2018. Today’s share price of 654p is well below its 52-week high of 761p.

Software, hard profits

Yet I feel the dip in sentiment has been overdone, given that group organic revenue increased by 5.1% for the first three months of the year. Organic recurring revenue grew an even healthier 9.6%, driven by software subscription growth of 31%, taking the total number of contracts to 1.1m.

The dip in the share price looks like a buying opportunity to me, with City forecasters calculating that EPS will rise 17% in the year to 30 September, and another 9% after that. Its forecast valuation of 20.4 times earnings is on the high side, but that is what you have to pay for a proven track record like this one. This may be an opportunity worth taking.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Sage Group. 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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