When most investors think of the FTSE 100, it’s often the big dividend-paying stocks that spring to mind — big banks, oil majors, or tech giants. But reliable growth stocks are a different breed. Instead of dishing out large chunks of profit to shareholders, these companies plough earnings back into the business, compounding their value over time.
The result? More consistent capital gains. Reliable growth stocks often show a return on equity (ROE) comfortably above 15%, alongside higher-than-average price-to-earnings (P/E) ratios that reflect investor confidence in their long-term potential.
Two of the most reliable growth stocks on the index, in my view, are Diploma (LSE: DPLM) and Halma (LSE: HLMA). Both sport forward P/E ratios around 30, deliver ROE above 15%, and have posted positive share price growth in 13 of the past 15 years.
For those seeking slow but steady compounding, they are both highly compelling stocks to consider.
Diploma
Diploma is a London-based supplier of specialised technical products and services. Its market capitalisation currently stands at £7.27bn, having risen 25% in the past year. Over the last decade, the shares have skyrocketed by a jaw-dropping 663%.
That kind of growth might sound speculative — and in some ways it is, with the stock trading at nearly eight times its book value. Yet, on a P/E-to-growth (PEG) ratio basis, it doesn’t look overly stretched. Earnings growth has outpaced revenue growth significantly, up 44.2% year on year, compared to revenue growth at around a third of that pace.
In August, Davy Research boosted its target price for Diploma by 10%, suggesting analysts remain confident in its growth story.
Of course, risks remain. The share price recently stumbled after the CFO resigned due to personal conduct issues, which could unsettle operations in the short term. Still, the company’s fundamentals look solid, and the long-term trajectory remains intact.
Halma
Halma is a global group of safety equipment firms making products designed for hazard detection and life protection. With a £12.4bn market cap, it’s nearly twice the size of Diploma.
Performance has been steady rather than spectacular. Its share price has risen 338% over the past decade — impressive, though only about half of Diploma’s gains.
Halma recently strengthened its growth credentials with the €150m acquisition of Brownline, a deal analysts at UBS believe will enhance its environmental-monitoring technologies portfolio. Peel Hunt also raised its price target from 3,280p to 3,550p, signalling strong optimism for future earnings.
On the risk side, Halma’s reliance on steady but incremental acquisitions means integration challenges can crop up. Growth is also priced in, with valuations looking expensive compared to peers. But the company’s ability to consistently deliver has made it one of the most dependable growth stories on the FTSE 100.
Slow. Steady. Secure
Diploma and Halma may not have the flashy appeal of AI firms or the blockbuster dividends of banks, but their track records speak volumes. Both have rewarded patient investors with consistent long-term capital gains.
For investors looking to safeguard a portfolio, I see them as defensive growth plays. They might not double overnight, but for those seeking reliability, I think they’re two of the best growth stocks the FTSE 100 has to offer.
