Halma the dividend star delivers

If you had to pick one share that consistently delivers record results and inflation-busting dividend growth, Halma would be a serious contender. Its success is largely down to sensible diversification and an ability to move quickly as market conditions change. It's why, despite a downturn in the oil and gas industry, the smoke detectors and automatic door sensors firm still had a record first-half and grew the payout by 7%.

Adjusted pre-tax profit grew by 8% in the 27 weeks ended 3 October to £74.7 million, and by 4% on an organic basis at constant currency. Revenue increased by 11% to £380 million, representing 7% organic growth. Margin at 19.7% remained within the 18-22% target range.

"Demand for our products is underpinned by the long-term market growth drivers of increasing safety regulation, increasing demand for healthcare and increasing demand for life-critical resources," explains chief executive Andrew Williams.

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Three of Halma's four divisions grew organic revenue during the period. Its blood pressure analysers sold well in America, Williams told Interactive Investor Tuesday, which explains why the higher-margin medical division grew by 12% and US sales grew by a fifth, or 10% organically, to £124.5 million.

Things have certainly settled down in the US post-Obamacare reforms, although half-year numbers at the medical business were also aided by a big increase in research and development and product approval for sales into China. Profit rose 13% organically, and demand for kit that helps tackle diabetes and obesity is only likely to grow.

Heavy investment in new products also made sure the infrastructure safety unit increased organic revenue by 8% to £122.4 million, and kept winning market share. Fire detection and automatic door sensors were big sellers again, and profit was up 7% on an organic basis to £24.6 million. Structural changes made last year at the environmental and analysis division also seem to be working - both revenue and profit grew in the half-year.

Process safety, which relies on the oil and gas industry for about 44% of its revenue, was the only disappointment this time. Organic sales fell just 1%, although organic profit was down 14%. "We're not going to see oil or mining recovery for a year or two," Williams told us. That's why Halma is cracking down on costs and spending cash on other markets.

A stunning record of creating value

Clearly, Halma is a well-run business with a stunning record of creating value for shareholders. Its share price is up fivefold since 2009, and the company has grown the full-year dividend by over 5% for each of the past 36 years.

I asked the management team whether they might be more generous with the payout - Halma yields a modest 1.7% currently. "We chat about this every year, but always see ample room for investment," they say. "It's part of the balance of returns to shareholders. We think the balance is about right. It's nice to have something sustainable rather than one-off change."

And Halma has a knack of finding good businesses to buy. It's just paid £73 million for a company called Firetrace. Based near Phoenix, Arizona, it makes fire suppression systems which detect fires in small spaces far quicker than traditional methods, perfect for cars, lab equipment and industrial machinery.

Management says Halma is still on track to make progress in the second half of the year, in line with expectations. According to Investec Securities, watch out for underlying pre-tax profit of £164 million for the year ending March 2016 on revenue up to £788 million. Using forecasts for underlying EPS of 33.4p, Halma trades on 24 times forward earnings, eye-watering, yes, but a deserved premium to the sector.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.