Nestlé SA is a food and beverage company. The company operates in Zone Europe, the Middle East and North Africa. Zone Americas; Zone Asia, Oceania and Sub-Saharan Africa; and Nestlé Waters segments.
The company is based in Switzerland and reports profits and dividends in Swiss Francs (CHF). For this analysis, I use the Swiss franc as the reporting currency. However, when converting to US dollars, be aware that there may be fluctuations due to changes in exchange rates. There is also a 15% withholding tax on dividends for US taxpayers, levied at source. Therefore, it may be best to keep these shares in a taxable account.
Nestle is an international dividend aristocrat who has managed to increase dividends annually since 1995. Upon reviewing Nestle’s dividend history, it looks like Nestle hasn’t cut or suspended dividends since at least 1959, which is impressive.
Between 2009 and 2020, Nestle managed to increase the dividend from CHF 1.60 / share to CHF 2.75 / share.
The company managed to increase earnings from 2.92 / share in 2009 to 4.30 / share in 2020. Nestle is expected to generate 4.39 CHF / share in 2021.
What appeals to me at Nestle is the predictability of the food and beverage industry, which Nestle leads in. Food and beverage demand in emerging markets is expected to grow while remaining stable and relatively immune to the ups and downs of the economy. With its strong presence in emerging markets, Nestle is well positioned to meet the growing prosperity of emerging markets. In fact, 40% of the company’s sales came from emerging markets. Understanding the local markets and strategic acquisitions will be the key to future success.
The company is expanding its e-commerce segment and capitalizing on the trend for consumers to shop online or in-store. This is a testament to Nestle’s strong brands that lead to small repeatable transactions for consumers. The company’s business was resilient and adaptable even during the pandemic. These are the kind of recession-proof stocks that shareholders could keep rewarding with raises for years to come.
The company has achieved strong organic growth in key areas such as North America, Europe and Asia through a variety of factors. Some of these include product innovation, capitalizing on the company’s global size, investing in building and maintaining the company’s strong brand positions worldwide. The company has 29 billionaire brands that have also seen strong organic growth in recent years. Nestle’s long-term goal is to achieve organic sales growth, sustainably improve EBIT and improve the trend in return on investment capital. It has solid competitive advantages in terms of scalability and reach of its sales channel around the world. It has a portfolio of solid brands that have premium pricing and consumers are willing to pay for their quality. The company continually invests in its brands, seeking to innovate and satisfy emerging consumer trends, and adapting to the conditions in different market environments in which it operates.The company takes an active approach to its brand portfolio, trying to enter attractive segments and leaving those where it does not have a competitive advantage.
I like investing in boring companies that have been around for over a century that have managed to survive and thrive amid a myriad of cataclysms. These companies are predictable, offer a product or service that customers crave, and are often in a niche with a low likelihood of technology obsolescence. Technology changes can actually lower costs, make production / marketing / sales more efficient and lead to higher profits. These companies sell small, everyday repeat items to consumers and become more valuable over time as the business grows.
Nestle owns 23% of the French cosmetics company L’Oreal. Check this article: If you had to own a company for a generation …
Nestle has also done an excellent job buying back shares. Between 2009 and 2020, the number of shares issued decreased from 3.572 billion to 2.849 billion.
The payout ratio has increased slightly since 2008 and after 2010 was mostly over 60%.
Nestle stock isn’t cheap, with 23.70x futures earnings, but it’s a quality company that is likely to hang around for a while. If you asked me to put 100% of my money into a company, Nestle would be high on my list. It has geographical diversification, a portfolio of strong brands, a long history of growing brands, a portfolio of products that are relatively immune to the short-term business cycle, and a leadership position in the various niches in which it operates. The stock offers a yield of 2.65%.
– If you had to own a company for a generation ..
– The best asset class for retirement accounts