Reckitt Benckiser is one of the world’s leading fast moving consumer goods companies, selling familiar products like Dettol, Durex, Nurofen, Vanish and Cillit Bang.
In recent years RB and similar companies like Unilever have become very popular with investors, largely because they offered a seemingly low risk way to invest in shares whilst still achieving attractive returns.
For a long time RB lived up to that promise, but more recently things have become less certain and RB’s share price has declined by almost a third since its 2017 high.
This share price decline has driven the company’s dividend yield up to 3%. That’s below average, but it’s still much better than the sub-2% yield RB was offering a couple of years ago.
So does this lower share price and higher dividend yield mean Reckitt Benckiser is good value again, or is it just an overpriced seller of cheap goods?
Continue reading “Does Reckitt Benckiser’s 30% share price decline make it good value?”
Rolls-Royce shares are about 20% below where they were in 2013.
That’s very different to the previous six years (from 2007 to 2013) when the company’s shares went up by more than 150%.
So does this long period of weak share price performance mean Rolls-Royce is now a bargain, or is it simply a reflection of a struggling company?
Continue reading “Is it time to ditch Rolls-Royce after six difficult years?”
Rightmove is an incredible business. In the 11 years since it listed on the stock exchange its:
- Revenues have gone up by more than 370%, going from £57 million to £268 million
- Earnings have gone up by more than 1100%, going from 1.4p per share to 17.7p
- Dividend has gone up by more than 980%, going from 0.6p per share to 6.5p
If that isn’t impressive then I don’t know what is.
And this isn’t the result of a one-off fluke, because Rightmove’s revenues, earnings and dividends per share have increased every single year for the last decade.
That, in a nutshell, is exactly the sort of broad and steady growth that so many of us are after, so Rightmove definitely deserves a closer look.
But like all investments, Rightmove has its bearish points as well as its bullish points, so in this blog post I run through what I think are the main ones before getting onto the subject of Rightmove’s measly dividend.
Continue reading “Rightmove’s shares could be good value if you don’t care about dividends”
Earlier this month, Interserve went into administration.
Its shares have been rendered worthless and the company is now owned by its former lenders.
I may be stating the obvious, but this is not a good outcome for Interserve’s shareholders.
So how did it all go so very wrong for Interserve, when just a few years ago it was riding high with a steadily growing dividend and a market cap of almost £1 billion?
In my opinion there were four main problems, which to varying degrees were also to blame for similar collapses at both Capita and Carillion.
Continue reading “What went wrong at Interserve?”
Unilever has produced amazing results for shareholders over many decades and especially in the last ten years.
Its shares have more than tripled since their 2009 lows and, with progressive dividends included, shareholders have seen returns of around 15% per year over ten years.
That would be impressive for any company, but it’s even more impressive given Unilever’s defensive nature, thanks to its large portfolio of defensive consumer products such as Domestos bleach, Matey bubble bath and Ben & Jerry’s ice cream.
However, it’s a fact that trees do not grow to the sky and companies cannot grow faster than average forever.
So does this mean the good times are finally over for Unilever investors, or is the company still a no-brainer if you’re looking for income and growth?
Continue reading “Buy Unilever. Sleep for 20 years. Wake up rich?”
BAE Systems is an obvious choice for defensive dividend investors.
(1) BAE Systems is the UK’s largest defence contractor which should make it a relatively defensive company (governments may cut back on defence spending during recessions, but typically any cuts are not drastic).
(2) It has a long track record of progressive dividend growth, with the dividend going from 9.2p in 2003 to 22.2p in its recent 2018 results.
(3) It has a slightly above average dividend yield of 4.7% at its current price of 470p.
But life is rarely that simple and BAE does have a few features which make it less attractive than it might appear at first glance.
Continue reading “BAE Systems has a decent dividend but is it good value?”
Thanks to the financial crisis of 2007-2009, I rarely review banks.
That isn’t because I think banks are intrinsically ‘uninvestible’. It’s because most of them suspended their dividends post-crisis and:
The first rule of defensive value investing is...
Only invest in companies that have a ten-year unbroken track record of dividend payments
However, some UK banks managed to continue paying dividends throughout the crisis, and HSBC is the biggest of them.
So in honour of the fact that it’s almost ten-years since the global stock market lows of March 2009 (when many big banks and other financial firms took us to the brink of Armageddon), I thought it was about time I looked at HSBC to see how it’s coping in this post-crisis world.
Continue reading “Is HSBC worthy of investment ten years after the financial crisis?”
As I’ve mentioned several times before, 2018 was not a vintage year for my model portfolio.
It wasn’t a terrible year either, but there were more bumps along the way than I would have liked.
One of those bumps was caused by N Brown, the size 20+ and age 50+ clothing retailer, when it cut its dividend in half.
Continue reading “Dissecting N Brown’s dividend cut with 20/20 hindsight”
When I think of WH Smith, I think of a company which sells products that are either:
- in decline (physical newspapers, magazines and books),
- can be purchased more easily online (note paper, pencils, exercise books) or
- are basically extinct (CDs, DVDs and vinyl records).
In other words, my default mental image is of a company destined to become the next Woolworths.
However, if you look at WH Smith’s financial results over the last decade, you’ll see a company which has grown its earnings and dividends per share by about 10% per year, every year. That’s pretty amazing, especially for a company over 200 years old.
That’s partly why I decided to review WH Smith in my latest article for Master Investor magazine.
Continue reading “WH Smith: A good choice for dividend growth investors?”
Hargreaves Lansdown is a name we’ve all heard of. It’s the dominant leader of the investment platform market and its 40% market share is about four times that of its largest competitor.
Despite its size, it’s still growing quickly with a ten-year dividend growth rate of almost 17% per year.
That’s impressive, but perhaps more impressive is the company’s astronomical 70% average ten-year return on capital employed.
In fact, Hargreaves Lansdown is so profitable that the FCA has launched an investigation into the competitiveness of the investment platform market (although I guess those two facts could be unrelated).
Hargreaves Lansdown’s massive growth and profitability are extremely attractive features, but that attractiveness has driven the share price up and the dividend yield down, and today the company’s dividend yield is well-below 2%.
For some income investors, a sub-2% dividend yield will be unacceptable, and that includes me. But perhaps I’ll make an exception for a company as exceptional as Hargreaves Lansdown.
Continue reading “Is Hargreaves Lansdown’s dividend yield too low for income investors?”
Diageo is a low-risk company with a long history of progressive dividend growth. But with a dividend yield of just 2.4%, are investors overpaying for its defensive characteristics?
The answer will depend on how quickly Diageo can grow its dividend, so the first thing I’ll do is try to estimate what sort of long-term dividend growth Diageo can realistically achieve.
Note: If you haven’t heard of Diageo before, it’s one of the world’s leading beverage companies and owner of brands such as Smirnoff, Bailey’s and Guinness. I wrote a very long review last year (perhaps too long) so have a look at that if you want more background information.
Continue reading “Are investors overpaying for Diageo?”
Accounting software firm Sage has generated dividend growth of more than 8% per year over the last decade. That’s impressive, but is it enough to justify the company’s measly 2.4% dividend yield?
At first glance, I’d say yes. After all, a 2.4% income growing at 8% per year will give you a total annual return of 10.4% if the share price grows in line with the dividend.
But investing is not quite that simple, so we’ll need to look at Sage and its financial results in a little more detail.
Continue reading “Is Sage the perfect dividend growth stock?”
Ted Baker is an interesting company.
It started life in 1988 as a single store in Glasgow, selling its own brand of men’s shirts. 30 years later it’s listed in the FTSE 250, has several hundred stores and concessions and generates revenues of more than £500 million and net profits of more than £50 million.
That happy little success story is somewhat interesting, but as an investor what’s more interesting is the company’s near-perfect growth record.
What do I mean by “near-perfect”?
Well, Ted Baker joined the London Stock Exchange in 1997 and from then onwards its revenues and dividends (which it started paying in 1999) have increased every single year. And if it wasn’t for a minor one-year decline after the financial crisis, its profit growth would be just as impressive.
As a defensive value investor, I find that sort of consistency very interesting, along with its double-digit growth rate and near-3% dividend yield.
Continue reading “Is Ted Baker the perfect dividend growth stock?”
One nice feature of the stock market is that you don’t have to reinvest your income to benefit from compound interest.
That’s because most companies retain a significant portion of their profits even after dividends have been paid.
Those retained profits are then re-invested in the business, compounding profits even if you don’t reinvest your dividends.
Some of the best profit compounders are known as capital-light compounders.
Continue reading “3 High yield capital light compounders”
BT’s share price has fallen by more than 50% over the last two years and today its dividend yield is around 8%.
Ever the bargain hunter, I decided to take a closer look.
I wanted to see if BT had any major problems, or if the market was overreacting as it so often does.
Continue reading “I wrote a negative review of BT and the CEO jumped ship. Coincidence or not?”
Sainsbury, Asda and other large UK supermarkets are currently engaged in an all-out price war with Aldi and Lidl.
While price wars may be good for customers, they are rarely good for companies, their profit margins or their shareholders.
Continue reading “Why the Sainsbury / Asda merger is necessary but not sufficient”
In this month’s Master Investor magazine, I reviewed Centrica, a large and mature business operating in a very defensive sector, which at the time of writing had a dividend yield of more than 8%.
Continue reading “Centrica’s 8% dividend yield means it’s priced for energy Armageddon”
Since the middle of 2017, shares in British American Tobacco have fallen by as much as 30%. The shares now have a dividend yield of almost 5%, so does this mean they’re good value?
Continue reading “Are British American Tobacco shares good value?”
In the latest issue of Master Investor magazine, I looked at four high-growth “dividend champions”, i.e. companies that have grown quickly whilst raising their dividends every year for the last decade or more.
Continue reading “4 High growth dividend champions”