You can load your library with all the investing manuals, financial pages and broker notes that you can find. But it’s no guarantee of success in the stock markets.
A common rule of thumb for successful long-term investing is to buy shares with the aim of holding them for a minimum of five years.
But as Tesco showed around the start of decade, some companies that look great on paper can be the cock of the walk one day but find themselves to be a feather duster the next. From reigning supreme in the UK grocery marketplace, in early 2012 it found itself issuing a shock profit warning, its first for two decades, and things have remained challenging ever since.
It would have been hard to predict the supermarket’s decline just 10 years earlier, let alone a quarter of a century before. Picking stocks that can continue thriving many decades into the future is risky business, but it’s not impossible.
Take Reckitt Benckiser Group (LSE: RB), for example. Its share price has expanded by a whopping 850% since December 1993, rewarding share pickers who piled in all the way back then. What’s more, I believe it has what it takes to keep rising over the next 25 years as well.
Profits reversals are a very rare occurrence at the household goods manufacturer. It has its fingers in many pies and it manufactures everything from condoms and headache tablets to hair removal cream and air fresheners. As Unilever found when its now-offloaded Spreads division was sinking as margarine sales collapsed, this diversification provides the foundation for long-term earnings growth even as consumer tastes change.
A broad product catalogue isn’t in itself enough to guarantee success, though, and so Reckitt continues to spend a fortune on the marketing and development of its goods to keep global consumers transfixed. The likes of Finish dishwasher tablets and Vanish stain removers are established leaders in their fields, and so can help sales to continue streaming during even the toughest of market conditions.
The popularity of its goods in North America and Europe has provided the bedrock for Reckitt Benckiser’s earnings growth for decades, but it looks as if fast-growing emerging nations in Africa, Asia and Latin America will prove the catalyst in years to come.
And what a catalyst it is likely to be. A note from the Emerging Markets Internet & Ecommerce ETF revealed that by the middle of the next decade, consumption in emerging markets will amount to some $30trn, nearly half of the global total. By 2025 the world’s consuming classes will swell to number around 4.2bn people, it added. There’s clearly a lot of business still to be won.
To summarise then, Reckitt is one of the best growth stocks on the Footsie, at least in my opinion, and fully worth its elevated premium (a forward P/E ratio of 19.3 times).
But a bulging bottom line isn’t the be-all-and-end-all — thanks to its exceptional defensive qualities the firm’s also a great bet for those seeking strong and sustained dividend growth. City analysts are expecting last year’s reward of 164.3p per share to rise to 168.8p in 2018 and again to 180.7p in 2019, figures that yield a chunky 2.7% and 2.9% respectively. And I fully expect dividends, along with profits, to continue screaming higher for years to come.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.