Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Top-Quality FTSE 100 Shares

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

LONDON -- Using a collection of criteria such as returns on capital employed and the free cash flow to asset ratio, I have attempted to identify the highest-quality companies on the market today. Here are three of the biggest qualifiers.

Clothing retailer NEXT  (LSE: NXT  ) is fast growing profits from its online operations. Growth from web sales contributed nearly all the profit growth produced last year.

In the last five years, NEXT has grown dividends per share at an average rate of 13.8% a year. In that time, earnings have been rising by an average of 12.1% a year. NEXT is forecast to increase earnings and dividends for the next two years, at an expected rate between 7% and 11% per year.

What makes NEXT's achievements so notable is the fact that in recent years, sales growth has been modest. Fortunately for value seekers, the shares trade on a 2013 P/E of 13.9 -- that's less than the average FTSE 100 stock.

2. Reed Elsevier 
Reed Elsevier  (LSE: REL  ) (NYSE: RELX  ) is a provider of "professional information solutions." Products include leading industry journals -- Reed Elsevier is publisher of both The Lancet and Gray's Anatomy.

The recurring revenues provided by many of the company's products underpin its ability to reward investors. In the last five years, dividends at the company have been increased by around 50%. Annual sales growth in that period has been a modest average of 3.6% a year. This has not stopped profit growth, however. Since 2008, reported net profits at Reed Elsevier have more than doubled.

Two years of earnings and dividend growth are forecast. This puts Reed Elsevier on a 2014 P/E of 13.1, with an expected yield of 3.5%.

3. Hargreaves Lansdown
As Hargreaves Lansdown  (LSE: HL  ) has grown, its economies of scale have enabled it to become even more profitable. Last year, the company reported a net profit of 131 million pounds on 266 million pounds of sales. Five years ago, before the financial crisis, the company made 17 million pounds from revenues of 99 million pounds.

Part of the reason for this impressive record is the fact that many of Hargreaves Lansdown's sales deliver recurring revenue (such as commissions on fund sales). This additional revenue is added at little cost to the company, meaning that profitability is ratcheted higher.

More massive growth is forecast for both earnings and dividends at the company. EPS (earnings per share) for 2014 is forecast to reach 37.1 pence per share, almost 50% ahead of the figure achieved for 2012.

Identifying and backing quality companies is the cornerstone of Warren Buffett's investment success. This billionaire super-stock picker has recently been buying shares in a different FTSE 100 company. To find out which one and the price he paid, get the free Motley Fool report "The One U.K. Share Warren Buffett Loves." This report is totally free and will be delivered immediately. Just click here to start reading today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2419221, ~/Articles/ArticleHandler.aspx, 10/25/2016 8:03:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 7:46 AM
HL $1170.30 Down -4.70 -0.40%
Hargreaves Lansdow… CAPS Rating: No stars
NXT $4750.00 Down -57.00 -1.19%
Next CAPS Rating: No stars
REL $1455.70 Up +14.70 +1.02%
RELX CAPS Rating: No stars
RELX $17.95 Down -0.11 -0.61%
Reed Elsevier CAPS Rating: *