Saturday, 9 March 2013

Reckitt & Benckiser

This company have their origins way back in the 19th century - Johann Benckiser founded an industrial chemical company in 1823 and Isaac Reckitt started a starch mill in Hull in 1840. Reckitt & Sons were first listed on the London Stock Exchange in 1888. In 1938 they merged with mustard makers J&J Colman to become Reckitt & Colman. In 1999, the companies merged to become Reckitt & Benckiser. They now claim to be the world #1 in household cleaning.

They have a range of ‘power brands’ - Cillit Bang, Durex, Dettol, Finish, Gaviscon & Nurofen - recession or no recession, people keep cleaning their kitchens and getting headaches.

Reckitt has been one of the stalwarts of my sipp for several years. Last year, I converted to income drawdown and although RB was sold to release the 25% lump sum, it was the first to be repurchased in my S&S ISA. I have added to my holding on a couple of occasions - the last time being when the share price dipped near to £30 following the announcing of the departure of CEO Bert Brecht in 2011. Here’s a link to the results via Investegate  2012 FY Results

I normally have a limit of 10% for any single share in my portfolio however, due to the recent share price surge, Reckitt has just tipped over this limit so I will need to keep a close eye on this and look again at the half year mark in June.

Last month Reckitt reported full year results for 2012 - steady progress but nothing spectacular - just the way I like it.
They reported a good performance in developing markets, with sales in Asia, Africa, Latin America and eastern Europe more than offsetting weakness in western Europe and North America.

They are proposing an 11% increase in the final dividend from 70p to 78p which will mean a full year dividend of 134p and yield of just under 3%. Now 3% return is below the average for the FTSE 100 so it could be argued you would get a better return on a tracker. However, the reason the yield is 3% is due to the strong share price rise, currently over £46 - up around 20% so far this year - if the price had remained fairly static since the start of 2013 - £38.75 - the yield would be nearer 3.5%.

The divi has more than doubled from the 55p paid in 2007, growing at the rate of 16% (CAGR) - if it continues at a similar rate in the future, the dividend will double every 4.5 years. As an income investor, I would rather have a smaller percentage of a faster growing pot. I have pencilled in 145p for the coming year.

New CEO, Rakesh Kapoor is making progress with plans to refocus more towards the faster growing emerging markets like Brazil and India and has set a target of these EMs to become 50% of the core business by 2015.

This is, in my opinion, a quality operation and one of my better investment decisions. I can imagine holding RB for quite a while - for me it would just about represent the epitome of a long term buy & hold share.

As ever please DYOR.

2 comments:

  1. Hi John

    Thanks for the interesting take on RB. You touched on the dividend record. By my calculation they have continually increased dividends year on year since at least 2006 and for that I have them firmly on my HYP watchlist. I can't however pull the trigger as the forecast yield of only 3.1% keeps them well down my list of possible purchases.

    Cheers
    RIT

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  2. Hello RIT,

    Here's a link which shows divis have increased each year since 2002 -

    http://www.rb.com/media-investors/shareholder-information/dividend-information

    A touch over 3% would probably have been the yield when I first purchased some years back. I find that some of the more dynamic companies always appear a little stingy on yield at whatever point you are looking to buy - although the dividend is increasing strongly, so is the share price.

    Good luck with the HYP building!

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