In recent days I’ve taken the time to look at GlaxoSmithKline. I’ve explained that because of the growing investment in healthcare and medicines we’re seeing across the globe, and this FTSE 100 stock’s brilliant drugs pipeline, it’s a company I’d be happy to use my last few pounds to invest in.
But if I was shopping for stocks and only had £1,000, I’d also be drawn to Reckitt Benckiser Group (LSE: RB), another Footsie firm I believe is nailed-on to deliver brilliant shareholder returns in the years ahead.
The household goods giant has already more than proved it has what it takes to improve annual profits year after year and, consequently over the past half a decade alone, the bottom line has swelled by a sturdy-if-unspectacular 26%.
Many growth investors will no doubt be turning their noses up at this though, not to mention City predictions that Reckitt’s earnings will swell an extra 2% and 6% in 2019 and 2020, respectively. Of course, there’s plenty of shares out there with better profit growth projections over the next couple of years, although I doubt many will have the defensive strengths of this Footsie firm that all-but-guarantees exceptional returns over the long term.
I’ve long lauded Reckitt’s broad territorial footprint and its commitment to investing in its jammed portfolio of brands, including Gaviscon indigestion reliever and Durex contraceptives, providing the base for relentless profits expansion regardless of broader pressures on consumer spending power. And the broad scope of Reckitt’s consumer healthcare labels is something that’s particularly exciting, not just because of the allure of their labels for customers.
In great health
Public consciousness of living a healthy lifestyle with a nutritious diet is driving demand for over-the-counter products like never before, and this isn’t just a phenomenon in developed economies. Indeed, increasing spending power in emerging regions is driving demand for consumer health goods too, territories in which Reckitt already has a sizeable stake.
Like-for-like sales at its consumer healthcare brands surged 4% in the most recent quarter, meaning that more than 60% of group revenues come from these labels. But Reckitt isn’t satisfied and expects much, much more.
As well as setting up a separate ‘Health Business Unit’ division under its RB 2.0 restructuring programme in early 2018, incorporating its health products as well as its then-newly-acquired Mead Johnson business and some of its Hygiene Home brands, it’s also cut the ribbon on its gigantic £105m healthcare development centre in Hull. The move represents the biggest single investment in Reckitt’s history and underlines the confidence it has in the potential size of this market, not to mention the company’s ambition to become the global leader in this field.
There’s a lot to like about this consumer goods colossus, in my opinion, thanks to its great growth profile and its long-running, progressive dividend policy (which throw up large yields of 2.9% and 3.1% for 2019 and 2020, respectively). It’s a Footsie share I’d happily buy today and cling onto for years to come.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.