Calling dip buyers! I reckon this FTSE 100 dividend stock is a brilliant buy following October’s sell-off

I think it’s a great time to go shopping for FTSE 100 (INDEXFTSE: UKX) income shares and for this blue-chip beauty in particular.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

October has proved to be a month to forget for Reckitt Benckiser Group (LSE: RB). The household goods manufacturer hit the ground running by posting one-year highs above £71 per share, but soon succumbed to the washout we witnessed across all share markets. In total it has lost 10% of its value this month, a disappointing set of financials released in that time having compounded investor bearishness.

The Nurofen and Durex maker declared just yesterday that manufacturing difficulties at its baby milk factory in Europe meant that it was unable to meet strong demand. As a consequence, revenues for the third quarter took a hit to the tune of around £70m.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

What’s more, although the disruption has now been resolved, Reckitt warned that it expects some residual impact through the remainder of the year and into 2019. This is the worst possible start the business could have had after snapping up US formula giant Mead Johnson back in 2017.

Developing markets still performing

Disappointing news, no doubt. But aside from these woes, the FTSE 100 firm’s latest release provided plenty for glass-half-full investors to get their teeth into.

Time and again I’ve celebrated what the firm’s extensive developing market exposure should mean for future profits growth. And I’m pleased to see that in this regard its Q3 numbers didn’t let me down.

Okay, like-for-like sales of its Health products may have dipped 1% between July and September, but this reverse can be explained away by those production problems I mentioned earlier. Indeed, the brilliant sales potential of its products in these future economic powerhouses was underlined by a 12% like-for-like sales improvement at the company’s Hygiene Home arm.

Of course the company isn’t immune to a little earnings turbulence from time to time but, over the long term, investors can expect the Footsie firm to deliver decent profits growth thanks to the strength of its product catalogue, its dedication to innovation, and its broad geographic footprint.

In fact, these qualities mean that Reckitt  is still expected to record a 2% earnings rise in 2018, despite those problems at its Dutch milk powder facility. And City brokers believe it will follow this year’s anticipated rise with a further 8% improvement in 2019 too.

Dividend dynamo

The recent share sale I spoke about earlier means that the firm can be picked up on a forward P/E ratio of 19.3 times. This isn’t exactly cheap from a conventional perspective, the reading sitting outside the widely-regarded value terrain of 15 times and below. But compared to its traditional, elevated, valuations the company can be considered a snip at the current time.

Besides, its status as a reliable profits grower means that it remains a good pick for those seeking dividend rises as well. A 168.5p per share reward is forecast for this year, up from 164.3p last year, and a 180.9p payout is forecast for 2019.

These forecasts yield a chubby 2.7% and 2.9% respectively, and are covered 2 times by anticipated earnings, bang on the accepted security benchmark. While bigger yields can be found on the FTSE 100, I think Reckitt Benckiser is in much better shape than most to continue raising the dividend year after year. It’s a white-hot buy right now, I believe.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »