Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Should I Invest in Reckitt Benckiser Group?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per year since Jan. 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities and today I'm looking at Reckitt Benckiser Group  (LSE: RB  ) , the health, hygiene, and home consumer products company.

With the shares at 4,658 pence, Reckitt Benckiser's market cap is 33,400 million pounds.

This table summarizes the firm's recent financial record:

Year to December 2008 2009 2010 2011 2012
Revenue (million pounds) 6,563 7,753 8,453 9,485 9,567
Net cash from operations (million pounds) 1,333 1,948 1,544 1,740 1,888
Adjusted earnings per share (pence) 160.9 198.9 229.4 249.9 267.6
Dividend per share (pence) 80 100 115 125 134

Around 56% of Reckitt Benckiser's core net revenue came from Europe and North America last year. That's a good mature-market base from which the company is pushing forward into fast-growing emerging markets, with some considerable success. In fact, around 27% of core net revenue came from Latin America, Asia, and the Asia-Pacific last year and 17% from Russia, the Middle East, and Africa.

Worldwide, people love the firm's "power" brands. Hygiene products, represented by names like Dettol and Harpic, provided 44% of that core net revenue; health products, like Durex, Strepsils, and Gaviscon, delivered 25%; and home products, like Vanish, Cillit Bang, and Calgon, contributed 23%.

All the firm's offerings have one thing in common: Customers buy them, they use them up, and they buy them again. Such platinum-plated repeat business makes me optimistic about the company's total-return potential from here.

Reckitt Benckiser's total-return potential
Let's examine five indicators to help judge the quality of the company's total-return potential:

  1. Dividend cover: adjusted earnings covered last year's dividend around twice. 4/5
  2. Borrowings: net gearing around 40% with net borrowings around operating-profit level.4/5
  3. Growth: revenue, earnings and cash flow have all been growing. 5/5
  4. Price to earnings: a forward 16.5 overstates growth and yield expectations. 2/5
  5. Outlook: satisfactory recent trading and a positive outlook. 4/5

Overall, I score Reckitt Benckiser 19 out of 25, which encourages me to believe the firm has potential to outpace the wider market's total return going forward.

Foolish summary
The firm scores well on my quality indicators. Such attractions have caught the eye of investors, who have driven the valuation up too far for my liking.

I'm keeping Reckitt Benckiser on watch for now, but I'm excited about a consumer-goods company featured in a new Motley Fool report prepared by our top analysts. The report highlights five shares with seemingly impregnable, moat-like financial characteristics and is called "5 Shares to Retire On." The shares featured deserve consideration for any investor aiming to build wealth in the long run. It's free for a limited period so, to download your copy now, click here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2427957, ~/Articles/ArticleHandler.aspx, 10/21/2016 6:33:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 12:10 PM
RB $7216.98 Up +72.98 +1.02%
Reckitt Benckiser CAPS Rating: No stars