Individuals vary in their phenotype and propensity for growth and survival, but the demographic consequences of this remain poorly understood. We extend previous theoretical work on benthic marine populations and formulate a new model to evaluate how demographic heterogeneity among newly settled reef fish affects population stability. We simulated settlement, growth, and mortality of a small reef fish, the common triplefin (Forsterygion lapillurn) in an open "subpopulation" using a delay-differential equation model framework. We modeled demographic heterogeneity with a discrete number of "quality" types, motivated by our previous empirical observations: individuals were either "high quality" (immigrants from nearby subpopulations) or "low quality" (immigrants from distant subpopulations); in our model, quality influences how quickly individuals develop at a given competitor density. Our results demonstrate how demographic heterogeneity and juvenile competition interact to qualitatively alter the effects of settlement on population stability. Specifically, our model suggests that a mixture of quality types can stabilize the equilibrium even when equal settlement of either type alone would result in an unstable equilibrium. These results highlight the importance of among-individual variation in a metapopulation context, and suggest that in systems where dispersal influences individual quality, connectivity may serve to stabilize local populations.