What do Dettol and Strepsils have in common? How about Clearasil, Cillit Bang and Durex? Vanish, Air Wick, Nurofen, Gaviscon…?
For one thing, they’re all big-selling global brands which bring in a fair chunk of cash every year — and I bet you’d like some of it, wouldn’t you?
Well, you can have it, because the other thing those brands have in common is that they are all owned by Reckitt Benckiser (LSE: RB) (NASDAQOTH: RBGLY.US).
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The company sells its products in close to 200 companies around the world, and raked in total revenue of more than £10 billion in 2013.
That has led to five straight years of rises in earnings per share, with a couple of years of flat earnings forecast for this year and next. And that’s led to a healthy annual dividend yielding around 3% on the current price of 4,858p — it’s not the biggest dividend in the market, but it’s a safe and reliable one and is well covered by earnings.
What has that done for the share price?
The share price is up just a couple of percent over the past 12 months, but over five years it has risen more than 85% against less than 70% for the FTSE 100. And over 10 years we see a massive gain of more than 250%, with the FTSE up just 50% overall.
And when it comes to using up our annual tax-protected ISA allowances (which will be going up to £15,000 in July), that’s the kind of thing we should be looking for — not high-risk get-rich-quick ideas, but solid companies that will be raking in the profits for decades to come.
So, if you were to invest £1,000 in Reckitt Benckiser shares today and leave them there for 20 years, how much might they be worth?
Twenty-year growth
Let’s assume a share price rise of 5% per year — which, given the potential growth for sales of Reckitt Benckiser’s products in developing countries, I don’t think is unreasonable. On top of that, let’s stick with the current dividend yield of 3% per year — and I think that’s cautious, with the average over the past five years coming out better than that at around 3.3%.
With dividends reinvested, that would take your starting £1,000 up to nearly £4,700 after 20 years. And if you compare that to the puny £1,300 that a cash ISA would get you from the same start, I think its easy to see where the real attraction lies.
