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Expensive but exceptional! A FTSE 100 growth dividend hero that could help you to retire early

For share pickers scouring the FTSE 100 for classic value stocks, Hargreaves Lansdown (LSE: HL) would at first glance appear the stuff of nightmares.

That said, earnings growth has been largely impressive at the investment services provider in recent times, the bottom line growing by double-digit percentages over each of the past three fiscal years.

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And City analysts are forecasting another meaty rise in the year to June 2019, a 17% advance currently forecast. However, a subsequent forward P/E ratio of 35.6 times — more than double the accepted value watermark of 15 times — would see it fall off the radar for investors hunting for conventionally-cheap stocks.

What’s more, it would also be easy to discount Hargreaves Lansdown as a great dividend stock purely on the back of its yield. Indeed, value investors may baulk at the 2.3% forward yield which lags the broader FTSE 100 average standing around 3.5%.

Look again

This would be a crazy attitude to take, though, given the rate at which the financial services giant is lifting dividends. The business has been splashing out special dividends like nobody’s business in recent years, although owing to a Financial Conduct Authority probe into its capital requirements, it was forced to put the kibosh on payouts the year before last as it squirrelled away an extra £50m to strengthen the balance sheet.

With this extra capital in place, Hargreaves Lansdown was able to reinstate these supplementary dividends again in fiscal 2018, meaning that a total dividend of 40p per share (comprising a 32.2p ordinary payout and 7.8p special reward) swelled 38% year-on-year.

And thanks to its solid earnings outlook and robust balance sheet the Footsie firm is predicted to keep the special dividends coming, meaning another hefty rise in the total payout — to 47.9p per share — is predicted by City analysts for fiscal 2019.

Raising the tempo

It’s little wonder then, that blue-chip investors have long paid little attention to Hargreaves Lansdown’s elevated earnings multiples and kept on piling into the stock. The firm’s share price has swelled by more than 50% over the past year alone. And like my Foolish colleague Roland Head, I’m fully expecting this charge to continue for some time yet.

Chief executive Chris Hill noted yesterday that Britons have a number of investment challenges to hurdle, namely “a £314bn savings gap, a greater need for self-provision over a longer period as life expectancy has extended, and a complex set of government incentives and tax allowances.

And through its broad range of industry-leading services Hargreaves Lansdown is making spectacular progress in this environment. The number of customers on its books leapt by 137,000 year-on-year in the last fiscal year, to 1.091m. Net new business inflows rose 10% to £7.6bn, a result that pushed assets under administration 16% higher to £91.6bn.

There’s plenty of reason to expect Hargreaves Lansdown to maintain its electrifying pace. I for one reckon the firm could help many an investor to enjoy an early retirement.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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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