I’ve been so used to seeing FTSE 100 stocks falling in this unprecedented year, but these two growth and income heroes have taken me by surprise. Both have recovered strongly from the stock market crash, to resume their longer-term upwards trajectory.
They’re not the best known stocks on the FTSE 100, but few will have rewarded investors as well over the past five years. If I had £5k to invest today, or any other sum for that matter, I’d consider splitting it between these two companies. Free of tax inside a Stocks and Shares ISA.
The Croda International (LSE: CRDA) share price is up a thumping 110% over five years. It fell during the stock market like almost every other FTSE 100 stock, but has recovered strongly and now trades notably higher than in January.
Two top FTSE 100 stocks
The speciality chemicals company hasn’t survived the Covid-19 market crash completely unscathed though. Last month, it reported a 12.8% drop in first-half pre-tax profit to £144.9m, as customer demand fell during the lockdown.
Trading’s now stabilised but the future is unclear and, like every other company, Croda is waiting to see how the recovery pans out. It’s still maintained its dividend though.
Croda has been a long-term growth star, with a total return of 563% over 10 years, according to AJ Bell. It has trashed most FTSE 100 stocks and this largely explains why the dividend yield looks relatively low at 1.5%, although nicely covered 2.1 times. Progression is all though, and management has shown plenty of that. It has increased the payout at an average annual rate of 15.3% for the last decade. Next year may see a smaller rise of 2.6%, analysts predict.
My one worry is that the Croda share price is expensive as it trades at 32 times earnings. Sales are forecast to rise 12% next year though. You pay a price for quality these days. Others may prefer to buy cheap shares, right now.
Delivering both growth and income
My next FTSE 100 stock pick is life-saving technology specialist Halma (LSE: HLMA), another unsung hero. The Halma share price has performed even better than Croda’s, rising an incredible 200% over five years. It’s also bounced back from the March crash, although not with quite the same vim.
Last month, Halma posted record annual profits and revenues for the 17th year in a row, boosted by an impressive 10 acquisitions. However, it did warn profits could fall in 2021, depending on the speed of the recovery.
The group looks well-placed to survive the recession, with strong cash generation, a robust financial position, and substantial liquidity. Again, the yield looks low at 0.74%, but that’s mostly down to rapid share price growth. Management has increased its dividend at an average rate of 7% over the past decade, and analysts predict another 8.2% hike next year.
Again, the problem here is the valuation. Halma trades at almost 40 times earnings.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International and Halma. 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.