Reckitt - as good as it gets?

[Arborbridge]

I notice RKT is yielding over 4% and has jumped up to 8th in my topup listing.

Either this is an exceptional period for us to top-up a long standing stalwart, or a warning, and yield trap.

At one time, I might have been jumping on this, but since the yield has increased mostly due to a terrible 3-4 year period for the share price, I am not so confident.

Arb.

[idpickering]

I notice RKT is yielding over 4% and has jumped up to 8th in my topup listing.

Either this is an exceptional period for us to top-up a long standing stalwart, or a warning, and yield trap.

At one time, I might have been jumping on this, but since the yield has increased mostly due to a terrible 3-4 year period for the share price, I am not so confident.

Arb.

Morning Arb. I don't hold Reckitt. If I did, I'd be reading the seemingly higher yield on ofer as being more to do with the lowering share price, and look elsewhere. Either way, 4% is hardly high yield anyway? For that share maybe, but there are better options elsewhere imho. They're a hold at best, again imho.

Ian..

[BullDog]

My take FWIW, risk of a dividend cut, risk that share price doesn't recover and continues downwards, 4% isn't enough to balance the risks.

On the other hand, it could be a rewarding takeover candidate at these prices.

Just my 2 pence on the share.

[kempiejon]

Oh is this another too high yield, bound to fail level? Or too high a yield bound to be a dividend cut? I know I can't know. Can't say I'd have marked Reckitt as an HYP pick previously but at 4.4% now... could be. 20+ years of increasing dividends. Single digit percentage, so marking inflation. Dividend cover pulled from dividendmax of 2.0. Might be as good as it gets so a good pointer Arb.

[Arborbridge]

My take FWIW, risk of a dividend cut, risk that share price doesn't recover and continues downwards, 4% isn't enough to balance the risks.

On the other hand, it could be a rewarding takeover candidate at these prices.

Just my 2 pence on the share.

The odd thing is that after a static dividend for a couple of years, it has started rising again, with increases of around 5% for each of the two past years.

Yet I am suspicious of the falling share price over such a long period of time. Not nice.


Arb

[Arborbridge]

Oh is this another too high yield, bound to fail level? Or too high a yield bound to be a dividend cut? I know I can't know. Can't say I'd have marked Reckitt as an HYP pick previously but at 4.4% now... could be. 20+ years of increasing dividends. Single digit percentage, so marking inflation. Dividend cover pulled from dividendmax of 2.0. Might be as good as it gets so a good pointer Arb.

My attitude towards RKT was always: "it's never going to be high yield, but I will buy it when the yield is as good as it gets because it is a stable share which churns out the goodies, therefore desireable in my HYP".

Arb.

[simoan]

My take FWIW, risk of a dividend cut, risk that share price doesn't recover and continues downwards, 4% isn't enough to balance the risks.

On the other hand, it could be a rewarding takeover candidate at these prices.

Just my 2 pence on the share.

I don’t see any fundamental reason why there should be a dividend cut. The dividend is covered well by earnings and free cashflow. The outlook for this year was good at the FY23 results in April and forecasts are for 3-5% dividend increases going forwards. There is a new CEO and CFO at the helm and the forecast PER is near the lowest it’s been for many years. Debt is being reduced gradually. I suspect there is the chance of a turnaround here, so I agree with the OP that it’s an interesting situation.

[kempiejon]

Oh is this another too high yield, bound to fail level? Or too high a yield bound to be a dividend cut? I know I can't know. Can't say I'd have marked Reckitt as an HYP pick previously but at 4.4% now... could be. 20+ years of increasing dividends. Single digit percentage, so marking inflation. Dividend cover pulled from dividendmax of 2.0. Might be as good as it gets so a good pointer Arb.

My attitude towards RKT was always: "it's never going to be high yield, but I will buy it when the yield is as good as it gets because it is a stable share which churns out the goodies, therefore desireable in my HYP".

Arb.

Yeah I've got some shares like - that 'scuse the tickers like LSEG, ULVR, DGE - but I think I still looked at absolute yield so I expect beating the FTSE100 and this looks like the first time for RKT but I've not followed closely.

[monabri]

The yield on offer is down to adverse risk : Mead Johnson baby formula lawsuit.

https://www.cityam.com/shares-in-ftse-1 ... its-mount/

15 March 2024

"Shares in FTSE 100 consumer goods giant Reckitt plunged more than 15 per cent on Friday as concerns grew about the firm’s exposure to lawsuits in the US.

On Wednesday, an Illinois jury ordered Reckitt’s unit Mead Johnson to pay $60m (£41.1m) to the mother of a premature baby who died of an intestinal disease after being fed Mead’s baby formula product Enfamil.

The trial was the first of several hundred trials that are set to come to court surrounding the baby formula, and the result was always going to be seen as a test case for the company.

Mead Johnson could still appeal the Illinois court ruling."

[IanTHughes]

The latest issue affecting Reckitt Benckiser Group plc (RKT) would appear to be legal:

https://finance.yahoo.com/news/reckitt- ... 28847.html

An Illinois jury last week ordered Reckitt unit Mead Johnson to pay $60 million to the mother of a premature baby who died of an intestinal disease after being fed the company's Enfamil baby formula.

The jury in a state court in St. Clair County found Mead Johnson was negligent and had failed to warn of the risk of necrotising enterocolitis (NEC). The disease, which causes the death of bowel tissue, mostly affects premature newborns and has a fatality rate of about 15% to 40%.

RKT are of course appealing the ruling

I doubt one of their brands Lysol missing sales targets helped much:

The decision is the latest blow to Reckitt's shares, which have fallen 22% since late last month when the Lysol maker missed fourth-quarter like-for-like net sales expectations, and said an investigation showed some employees had under-reported liabilities in the Middle East.

Since Feb. 28, Reckitt's market value has lost about 10 billion pounds ($12.74 billion).

I say latest problem because even before this lot transpired, RKT shares were already down 28% from July 2020.

Mind you, with a yield of around 4.20% RKT is hardly High Yield Portfolio (HYP) territory. Low Yield investors may see it as "as good as it gets", for a share that does have a solid record of rising dividends, over the long term.

Not yet enough for me!

Enjoy!


Ian

[simoan]

The yield on offer is down to adverse risk : Mead Johnson baby formula lawsuit.

https://www.cityam.com/shares-in-ftse-1 ... its-mount/

15 March 2024

"Shares in FTSE 100 consumer goods giant Reckitt plunged more than 15 per cent on Friday as concerns grew about the firm’s exposure to lawsuits in the US.

On Wednesday, an Illinois jury ordered Reckitt’s unit Mead Johnson to pay $60m (£41.1m) to the mother of a premature baby who died of an intestinal disease after being fed Mead’s baby formula product Enfamil.

The trial was the first of several hundred trials that are set to come to court surrounding the baby formula, and the result was always going to be seen as a test case for the company.

Mead Johnson could still appeal the Illinois court ruling."

Yes, this is the elephant in the room but in my experience these things never end up being as bad as reported in the media. Look how the GSK share price recovered since the original Zantac litigation news. Longer term, it’s pretty irrelevant. As private investors, we can make our own minds up about the level of risk we are prepared to take on each individual share as part of a larger portfolio. Institutional investors have much more of a problem in that regard, hence they sell at the first sign of bad news.

[Arborbridge]

I really do not understand how these numbers even get into people's imagination, let alone legal cases.

On what basis is a baby's life or a mother's angst worth £40 million? - it is beyond absurd- yet there it is.
We live in an absurd society.


Arb.

[IanTHughes]

The yield on offer is down to adverse risk : Mead Johnson baby formula lawsuit.

https://www.cityam.com/shares-in-ftse-1 ... its-mount/

15 March 2024

"Shares in FTSE 100 consumer goods giant Reckitt plunged more than 15 per cent on Friday as concerns grew about the firm’s exposure to lawsuits in the US.

On Wednesday, an Illinois jury ordered Reckitt’s unit Mead Johnson to pay $60m (£41.1m) to the mother of a premature baby who died of an intestinal disease after being fed Mead’s baby formula product Enfamil.

The trial was the first of several hundred trials that are set to come to court surrounding the baby formula, and the result was always going to be seen as a test case for the company.

Mead Johnson could still appeal the Illinois court ruling."

Yes, this is the elephant in the room but in my experience these things never end up being as bad as reported in the media. Look how the GSK share price recovered since the original Zantac litigation news. Longer term, it’s pretty irrelevant. As private investors, we can make our own minds up about the level of risk we are prepared to take on each individual share as part of a larger portfolio. Institutional investors have much more of a problem in that regard, hence they sell at the first sign of bad news.

I won't disagree with you with regard to this one ruling about one baby, but what about the possibility of a class action?

I think that RKT will survive, but at what cost?

Enjoy!


Ian

[simoan]

Yes, this is the elephant in the room but in my experience these things never end up being as bad as reported in the media. Look how the GSK share price recovered since the original Zantac litigation news. Longer term, it’s pretty irrelevant. As private investors, we can make our own minds up about the level of risk we are prepared to take on each individual share as part of a larger portfolio. Institutional investors have much more of a problem in that regard, hence they sell at the first sign of bad news.

I won't disagree with you with regard to this one ruling about one baby, but what about the possibility of a class action?

I think that RKT will survive, but at what cost?

Enjoy!


Ian

You’re being too alarmist. What is your experience of these things? How many times has one of your holdings been through litigation like this? I’ve held BHP through the Samarco dam accident, GSK through Zantac etc. plus many more. Make your own decisions and avoid watching/reading media would be my advice.

[IanTHughes]

I won't disagree with you with regard to this one ruling about one baby, but what about the possibility of a class action?

I think that RKT will survive, but at what cost?

You’re being too alarmist. What is your experience of these things? How many times has one of your holdings been through litigation like this? I’ve held BHP through the Samarco dam accident, GSK through Zantac etc. plus many more. Make your own decisions and avoid watching/reading media would be my advice.

Alarmist? All I was indicating is there would likely be some cost.

Actually, as the yield is still so low, I am barely interested.

Enjoy!


Ian

[tjh290633]

I notice RKT is yielding over 4% and has jumped up to 8th in my topup listing.

Either this is an exceptional period for us to top-up a long standing stalwart, or a warning, and yield trap.

At one time, I might have been jumping on this, but since the yield has increased mostly due to a terrible 3-4 year period for the share price, I am not so confident.

Arb.

I have topped up RKT 3 times this year so far, and it is still the top eligible share in my top-up rankings. I have been wondering whether to avoid it the next time.

I think the reaction to the court cases was down to some corporate knees jerking. I view litigation in the USA as being a regular hazard of doing business there. If judgement goes their way, the price will inevitably recover. If it doesn't, who knows. Meanwhile I am happy to enjoy the ride.

Actually RIO is coming up on the rails quickly and could usurp RKT's position. Things often change rapidly.

TJH

[simoan]

You’re being too alarmist. What is your experience of these things? How many times has one of your holdings been through litigation like this? I’ve held BHP through the Samarco dam accident, GSK through Zantac etc. plus many more. Make your own decisions and avoid watching/reading media would be my advice.

Alarmist? All I was indicating is there would likely be some cost.

Actually, as the yield is still so low, I am barely interested.

Enjoy!


Ian

I was referring to your “I think RKT will survive” comment. I don’t see any chance of this litigation meaning the end of the company.

[IanTHughes]

Alarmist? All I was indicating is there would likely be some cost.

Actually, as the yield is still so low, I am barely interested.

I was referring to your “I think RKT will survive” comment. I don’t see any chance of this litigation meaning the end of the company.

Point taken. I should perhaps have said that: "being such a large, global company, RKT will obviously survive, albeit at some cost". This is more inline with what I do believe.

In point of fact, I am more interested in Lysol's not making their sales expectation, which I understand maybe affecting other brands as well.

https://finance.yahoo.com/news/reckitt- ... 49283.html

Reckitt Benckiser Group Full Year 2023 Earnings: Misses Expectations

Of course for now I have simply read a few headlines, maybe I should take a more detailed look!

Enjoy!


Ian

[simoan]

In point of fact, I am more interested in Lysol's not making their sales expectation, which I understand maybe affecting other brands as well.

https://finance.yahoo.com/news/reckitt- ... 49283.html

Reckitt Benckiser Group Full Year 2023 Earnings: Misses Expectations

Of course for now I have simply read a few headlines, maybe I should take a more detailed look!

Enjoy!


Ian

Old news. I would suggest you avoid reading out of date media articles and refer to the latest news released by the company. In the Q1 trading update released on 24th April the company said:

"We have delivered a good first quarter. Following a period of price-led growth, we are now returning to a more balanced contribution from price, mix and volume. We grew volumes in many of our powerbrands in the quarter, including Lysol, Dettol, Durex and Finish, as well as our non-seasonal OTC portfolio. In addition, we continue to benefit from carryover pricing and consumers trading up to our premium innovations.

AND

Lysol delivered low-double digit LFL net revenue growth, led by strong volume growth. Our innovation platforms, including Lysol Laundry Sanitiser and Lysol Air Sanitiser drove growth in their respective segments. Lysol wipes benefitted from year-on-year distribution gains.

[IanTHughes]

In point of fact, I am more interested in Lysol's not making their sales expectation, which I understand maybe affecting other brands as well.

https://finance.yahoo.com/news/reckitt- ... 49283.html

Of course for now I have simply read a few headlines, maybe I should take a more detailed look!

Old news. I would suggest you avoid reading out of date media articles and refer to the latest news released by the company. In the Q1 trading update released on 24th April the company said:

"We have delivered a good first quarter. Following a period of price-led growth, we are now returning to a more balanced contribution from price, mix and volume. We grew volumes in many of our powerbrands in the quarter, including Lysol, Dettol, Durex and Finish, as well as our non-seasonal OTC portfolio. In addition, we continue to benefit from carryover pricing and consumers trading up to our premium innovations.

AND

Lysol delivered low-double digit LFL net revenue growth, led by strong volume growth. Our innovation platforms, including Lysol Laundry Sanitiser and Lysol Air Sanitiser drove growth in their respective segments. Lysol wipes benefitted from year-on-year distribution gains.

I prefer the extra detail contained within Interim and/or Full Year reports. This from 6 weeks ago:

https://finance.yahoo.com/news/reckitt- ... 49283.html

Reckitt Benckiser Group (LON:RKT) Full Year 2023 Results

Key Financial Results
Revenue: UK£14.6b (up 1.1% from FY 2022).
Net income: UK£1.63b (down 30% from FY 2022).
Profit margin: 11% (down from 16% in FY 2022).
EPS: UK£2.28 (down from UK£3.27 in FY 2022).

Yes, it is good that the company has patted itself on the back with its own positive Trading Update, they certainly needed it!

But, as I admitted, so far all I have done is read a few headlines, give me a chance!

Enjoy!


Ian