A dividend share I like the look of is Reckitt Benckiser Group (LSE: RKT). Here’s why I’m planning on buying some shares the next time I have some spare cash to invest.
Household cleaning products
Reckitt is now one of the premier household cleaning, health, and hygiene businesses in the world. Some of its best-known brands include Durex, Calgon, Air Wick, Harpic, and Vanish. Looking around my house, I’m definitely a loyal customer and have used many of its products.
As I write, Reckitt shares are trading for 5,466p, which is a slight 2% drop over a 12-month period. At this time last year the shares were trading for 5,592p.
Macroeconomic issues such as soaring inflation and rising interest rates have hampered markets, therefore, Reckitt shares have remained stagnant. However, I’m buoyed by this as it presents an opportunity for me to buy a quality dividend share at a cheaper price than usual.
The bull and bear case
I’m buoyed by Reckitt’s market position as well as geographical footprint. The business is a worldwide enterprise. In fact, it claims that 30m of its products are sold everyday all over the world. This dominant position is key as it can help support consistent performance, which underpin returns.
Next, Reckitt shares look decent value for money to me right now on a price-to-earnings ratio of 16. Although slightly higher than the FTSE 100 average of 14, I understand sometimes I have to pay a fair price for a quality company, especially when seeking consistent passive income.
Finally, Reckitt shares offer a dividend yield of 3.3%. There are dividend shares with higher yields out there but I’m more interested in consistent payouts. Reckitt has maintained an average yield of over 2%, moving past the 3% mark in the past year, for a decade. Of course, I’m conscious that dividends are never guaranteed and past performance is not an indicator of the future.
One of the biggest issues Reckitt faces is that of soaring inflation and rising costs. Rising costs for the business in the production and supply chain areas could hinder its profit margins, which underpin investor returns.
Inflation is tricky for businesses like Reckitt. If it increases its prices, consumers may move away from its branded products that are often seen as premium, towards cheaper essential ranges offered by supermarkets. During a high inflation economy, consumers are looking to make their budgets stretch further. I’ll keep an eye on trading updates in the near future to gauge the impact of inflation.
A dividend share I believe can flourish
To summarise, I think Reckitt is a rock-solid stock for me to buy now to boost my passive income. A dominant market position with a wide geographical footprint, as well as good payout record and enticing valuation, have helped me make my decision.
I firmly believe Reckitt has the staying power and fundamentals to withstand economic turbulence right now too.
