If you are looking for FTSE 100 dividend stocks you can buy and forget, then I highly recommend taking a look at safety product company Halma (LSE: HLMA).
It isn’t a household name, but the company has been a fantastic long-term investment over the past few decades. Management is focused on building the business for the long term with careful investment in new products and services as well as prudent capital allocation.
As well as these factors, Halma’s growth has been helped by the tailwind of health and safety regulation, which has helped drive the sales of its hazard detection and life protection products.
It’s unlikely this trend will change anytime soon. As long as Halma continues to reinvest sensibly, as it has done in the past, earnings should continue to rise thanks to the combination of organic growth and sensible acquisitions.
Robust growth
Earlier this year, Halma reported a 17% increase in adjusted earnings per share for its 2018 financial year, off the back of a 13% increase in group revenue. To celebrate, management decided to increase the firm’s full-year dividend by more than 5%, the 40th consecutive year of dividend increases.
The dividend is covered 3.3 times by earnings per share, so even after this increase, the company still has plenty of cash available to reinvest. This reinvestment is expected to translate into earnings growth of 18% for fiscal 2019, according to City analysts, pulling earnings per share up to 57.2, putting the stock on a forward P/E of 33.4.
The dividend yield stands at 0.9%, which is far below the FTSE 100’s average. But in my opinion, Halma’s dividend track record more than makes up for this.
Global champion
Spirax-Sarco Engineering (LSE: SPX) is another business that might not have household name status but shouldn’t be ignored as an investment. Spirax supplies engineered solutions for the design, maintenance and provision of industrial and commercial steam systems. The company has been in the business for more than 130 years and has carved out an excellent reputation for itself in this niche industry.
Steam systems can be both complex and dangerous if they go wrong, so customers don’t want to skimp on quality. That’s where Spirax comes in. The firm’s competitive advantage is its reputation and global presence, which allow it to demand sector-leading operating margins.
Last year, for example, the enterprise reported an operating profit margin of 26%, three times higher than the engineering industry average.
The company recently informed investors it was seeing some weakness in its end markets, which will hit revenues for 2019. However, I think this could be an excellent opportunity to snap up shares in the global giant.
The stock is off around 10% since the end of July and by 14% since mid-June. For a company that rarely puts a foot wrong, this is a rare opportunity to buy.
The dividend yield currently stands at 1.3% and the payout has grown at a compound annual rate of more than 10% for the past decade, putting Spirax in an elite club of dividend stocks.
