FTSE 100 champion
Halma is a group of companies with the primary aim of saving lives and increasing safety through technology. It operates in three broad market areas.
Halma’s safety companies protect life as populations grow and specifically look at worker safety. Environmental firms look at improving the quality of food and water as well as monitoring air pollution. Health focuses on the rising healthcare demand and lifestyle shifts over time.
As I write, Halma shares trade for 2,868p per share on the FTSE 100 index. This time last year, shares were trading for 2,200p which means its share price has increased 30% in the past 12 months. Year-to-date, its share price is up approximately 17%. This upward trajectory in recent times can be attributed to recently reported positive results and robust performance.
Performance and dividend increase
In its full-year report, released last month, Halma confirmed two key things that stood out for me. Firstly, as mentioned, it increased its dividend for yet another year making it 42 in total. In addition, and more importantly to me personally, it announced record profit for the 18th consecutive year. This is another feat not many other FTSE 100 firms can claim either.
Halma reported revenues during the 12 months to March 2021 actually dropped 1.5% to £1.32bn. Furthermore, sales dropped over 5% during the first half as the pandemic affected operations but this was to be expected in my opinion. Sales did pick up in the second half. Despite the overall sales drop, it did report profits rose by over 4% to £278.3m.
Due to this, Halma raised its annual dividends yet again. For 2021, it plans to pay a total dividend of 17.65p per share which is a 7% increase. Halma also confirmed it had made a good start to the current fiscal year which is a pleasing sign that its trend of increasing dividends may well continue.
Risk and reward
I have identified three primary risks that could hurt Halma and its dividend. Firstly, if the pandemic worsens and new variants arise, performance and potentially profit could be affected, like they were at the start of the pandemic last year.
Next, Halma is priced a bit high which means it is susceptible to a share price fall if any bad news were to occur. This could be pandemic related or perhaps political and humanitarian, which could have a negative knock on effect.
Finally, Halma’s core companies operate in a highly regulated space. If regulation were to tighten or change, this could affect performance and profit too.
Although the Halma share price trades at a high price-to-earnings ratio of close to 50, I still think it is an enticing prospect for my portfolio and a great FTSE 100 pick.
As well as its robust performance and yearly dividend increases that would help me make a passive income, it has a unique position to benefit in the current world we live in. Due to the pandemic, healthy and safety equipment and technology have become defensive sectors and this is Halma’s lifeblood.
Overall, I am considering adding some shares to my portfolio.
Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.