If I’d invested £1k in this FTSE 100 gem 20 years ago I’d be up 14 times

Jon Smith stretches out his time horizon and finds a FTSE 100 stalwart that has generated solid share price returns year after year, and isn’t finished!

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It’s good to have a clear focus for generating a steady return from FTSE 100 stocks each year. And it’s also good to spy out a stock that could turn a relatively modest sum into a serious chunk of money.

It only takes one good idea to achieve this, and I’m not just talking about high-risk penny stocks. Here’s one company in the FTSE 100 that would have done just that.

The brief rundown

The stock I’m referring to is Halma (LSE:HLMA). Incredibly, the business was formed in 1894 as a tea business. In the 1900’s it switched to rubber production, before settling on the industrial and engineering company we know today.

The company operates a relatively simple business model. It owns various businesses within the group that all contribute to overall profitability. A big area is safety, such as via Fire Detection. It also has companies within Water Analysis, Gas Detection and Health Assessment.

Halma reported record profit for the 20th consecutive year via its 2022 results earlier this year. This is a definite factor that has helped the share price to grow over that time period.

There are few businesses the size of Halma that can boast the same achievement. It’s easy to grow profits when a company’s small, but to maintain this even with FTSE 100 status is no mean feat.

Generating serious profits

Twenty years ago, the share price was trading at 145p. Currently, it’s 2,146p, a gain of 1,370%. Rounding up, this means a 14x return over the two-decade time span.

Two things strike me about this. When I look at the historical price movements, it has been a remarkably linear move higher in the share price. Even though volatility has picked up in the past couple of years, for the most part this has been a low-risk stock. This shows I don’t have to take excessive risk in the hunt for above-average returns.

I’m also conscious that my return hasn’t factored in the dividend yield. For the entirety of the period in question, Halma has paid out income. For most of the early 2000’s, this yield ranged 3-4.5%.

Granted, the current 1% yield isn’t inspiring, but compound the dividends over the two decades and this further adds to the overall profit.

Pushing for more returns

Some might argue that over such a long time period any investment would have made money. This isn’t true. I accept that other stocks might have generated a greater return, but I wouldn’t be turning my nose up at the profit from Halma.

Over the same period, the FTSE 100 is up 84%. So relative to this benchmark, it’s a solid return.

The key risk going forward is that past performance doesn’t guarantee future returns. I’ve no way of knowing if the Halma share price can keep going. Yet based on the current financials and outlook, I feel investors should still consider adding Halma shares to a balanced long-term portfolio.

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.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma Plc. 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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