When growth stocks go wild, I get nervous. I’m always wary of chasing momentum, worried I’ll turn up at the party just as everyone else is putting their coats on.
It’s a familiar problem. Shares only seem to land on my radar once they’ve already gone gangbusters. That was certainly true of these two FTSE 100 dividend growth darlings, which first caught my eye two or three years ago precisely because they were doing so well.
Back then, both looked expensive, with price-to-earnings ratios north of 30, roughly double the FTSE 100 average at the time. I decided to watch rather than buy. That turned out to be a sensible move.
RELX shares have surprisingly dropped
Weirdly, both stocks have subsequently followed an almost identical path. They carried on rising for another year or so, then promptly hit the buffers.
The two companies are information and analytics group RELX (LSE: REL) and accounting software provider Sage Group (LSE: SGE).
RELX is still up around 70% over five years, but down 16.5% in the last 12 months. Sage has climbed roughly 80% over five years, yet slipped 16.9% over the past year.
Sage is in the software and computer services sector, RELX is in information and analytics. However, both have been seen as domestic alternatives to the US tech giants. That might explain why they’ve suffered, amid fears over US technology stock volatility.
Artificial intelligence has added a further layer of uncertainty. At first, AI was viewed as a threat, potentially offering clients cheaper ways to access similar services. Then both companies talked up their own AI ambitions, which briefly reassured investors. The mood has shifted again, with growing anxiety over whether firms will earn decent returns on their hefty AI spending.
Or maybe RELX and Sage just got too expensive. So are they cheap now? Not exactly. Both still trade on P/Es of 25, with dividend yields of 2%, give or take the odd basis point. Again, the similarities border on the uncanny.
Shares to seriously consider buying?
It’s the same story with their dividend history. Both have raised shareholder payouts every year since the millennium, although RELX did freeze its dividend once, in 2010. Over the past 15 years, dividend growth at RELX has averaged around 9.3%, outstripping the 7.1% at Sage. So at least I can separate them on one metric.
Recent trading hasn’t been bad. RELX reported strong momentum in October, with underlying revenue up 7%, while its new AI-powered researcher tool has received “very positive feedback”. Sage followed in November with a 10% jump in full-year revenues and a 17% rise in operating profit.
Forward valuations are more appealing, with both trading on forecast P/Es of around 21.5. Not cheap, but no longer outrageous either. Naturally, they’re exactly the same.
My investment strategy is to buy good companies when they’ve fallen out of favour, and that’s exactly what seems to have happened here. AI remains a risk, as does wider economic weakness and their relatively high valuations. But I think they’re worth equally serious consideration for 2026. Both of them.
