A magnetic element is disclosed that has a composite free layer with a FM1/moment diluting/FM2 configuration wherein FM1 and FM2 are magnetic layers made of one or more of Co, Fe, Ni, and B and the moment diluting layer is used to reduce the perpendicular demagnetizing field. As a result, lower resistance x area product and higher thermal stability are realized when perpendicular surface anisotropy dominates shape anisotropy to give a magnetization perpendicular to the planes of the FM1, FM2 layers. The moment diluting layer may be a non-magnetic metal like Ta or a CoFe alloy with a doped non-magnetic metal. A perpendicular Hk enhancing layer interfaces with the FM2 layer and may be an oxide to increase the perpendicular anisotropy field in the FM2 layer. The magnetic element may be part of a spintronic device or serve as a propagation medium in a domain wall motion device.