Nestlé: income and long-term capital growth
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)
GREATER CHINA REGION
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.