Nestlé: in­come and long-term cap­i­tal growth

Finweek English Edition - - PRO PICK - BY LOURENS COET­ZEE In­vest­ment Pro­fes­sional at Mar­riott As­set Man­age­ment

Nestlé is one of the largest com­pa­nies in the world and man­u­fac­tures a wide va­ri­ety of f ood a nd be v e r a ge prod­ucts. Its brand port­fo­lio in­cludes much-loved brands such as Milo, Maggi 2-Minute Noodles, Nescafé, Kit Kat and Nesquik, to name just a few. The com­pany op­er­ates i n 197 mar­kets across the world and last year gen­er­ated CHF91.6bn (Swiss francs – equal to about R1.14tr) in sales.

Nestlé owns over 2 000 brands and 10 000 prod­ucts, and sells over 1bn prod­ucts daily, mak­ing it one of the most pro­lific com­pa­nies in the world. Its suc­cess can be at­trib­uted to the na­ture of its brands, which al­lows the com­pany to form part of the day-to-day lives of peo­ple around the globe.

Nescafé, for ex­am­ple, is the world’s best-sell­ing cof­fee brand and ac­counts for 44% of the in­stant cof­fee mar­ket. World­wide, con­sumers drink on av­er­age 5 500 cups of Nescafé ev­ery sec­ond of ev­ery day. Ev­ery year, 5.2bn packets of Maggi Noodles are sold and 650 Kit Kat fin­gers are con­sumed ev­ery sec­ond of the day.

Mar­riott rec­om­mends Nestlé as an in­vest­ment to hold for the long term as it has a re­li­able div­i­dend stream that is re­silient to un­ex­pected events. The busi­ness sells ba­sic ne­ces­si­ties world­wide, has a st rong ba l a nce sheet and in many ways is dis­tinctly in­de­pen­dent of its home econ­omy.

Thanks to the na­ture of its busi­ness, Nestlé will be largely un­af­fected by broad gov­ern­men­tal, po­lit­i­cal and eco­nomic

GROUP SALES ACROSS THE WORLD (in bil­lion Swiss francs)

TOP 10 MAR­KETS + SWITZER­LAND (in bil­lion Swiss francs)

UNITED STATES

GREATER CHINA RE­GION

FRANCE

BRAZIL

GER­MANY de­ci­sions. It tends to fare well in both re­ces­sion­ary and growth phases of the eco­nomic cy­cle and is sel­dom at the mercy of a new idea, trend or fash­ion. Its prod­uct range com­prises ev­ery­day ne­ces­si­ties, with mar­ket dom­i­nance a func­tion of its brands.

The c o mp a n y ’ s con­sis­tent per­for­mance has en­abled it to gen­er­ate an ex­cep­tional track record of re­li­able div­i­dends go­ing back to 1959.

Nestlé is cur­rently t rad­ing on a for ward div­i­dend y ield j ust above 3%, which is sim­i­lar to the JSE All Share In­dex. This gives i nvestors the op­por­tu­nity to im­prove both the over­all qual­ity and in­come pro­duc­ing c a pac i t y of t hei r p or t f ol i o s by in­clud­ing Nestlé.

I n ad­dit i on t o i t s pred i c t able d i v i dend s t r e a m a nd r e s i l i ence, t he share is priced at an at­trac­tive val­u­a­tion with pos­i­tive l ong-term cap­i­tal growth prospects, mak­ing it a good long-term in­vest­ment.

NESTLÉ OWNS OVER 2 000 BRANDS AND 10 000 PROD­UCTS, AND SELLS OVER PROD­UCTS DAILY, MAK­ING IT ONE OF THE MOST PRO­LIFIC COM­PA­NIES IN THE WORLD.

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