January Idea of the Month: Blue Chip Growth and Dividends

By Travis Johnson, Stock Gumshoe, January 14, 2011


Much of the time I end up profiling companies in this space that are quite small, relatively unknown, and perhaps a bit difficult to trade. I’m sure I’ll continue to do that in the future as interesting companies cross my radar, but today, with my level of uncertainty about the global economy fairly high, I want to urge you to look for growth from a company that has already proven it can deliver … and that will pay you a market-beating dividend at the same time.

And to let you know that I haven’t gone completely “boring”, the company will also be somewhat unfamiliar to many of my US readers — our next “idea of the month” is Reckitt Benckiser.

I think of Reckitt as sort of a junior version of Procter and Gamble or Johnson & Johnson, with (arguably, of course) better growth potential, particularly in emerging markets. They are a global maker of household cleaning products, personal care products, and pharmaceuticals. I wouldn’t steer you away from PG or JNJ either right now, to be honest, and both of those stalwarts will probably continue churning out profits and solid dividends, but I think that the growth potential at RB is significantly greater with their continuing focus on acquisition, integration, brand streamlining, and margin improvement and their above-average investment in marketing to build and hold their brand positions.

And RB is not listed directly in New York, though it’s quite easy to buy the shares on the pink sheets, and volume is reasonable enough to get a fair price. The home listing in London is at RB if you’re able to buy there, that’s where the greatest volume is and where the price is set. There is a 5:1 ADR that trades at RBGPY (meaning each share of RBGPY is one fifth of a share of RB), and also a direct 1:1 foreign pink sheet listing at RBGPF, as of this writing both are priced within about ten cents of the fair price set in London, so no fear of dealing with significant premiums or discounts when buying these shares (as we sometimes have to do with more obscure foreign pink sheets listings). If you choose to buy the shares and wish to buy on the pink sheets, you would simply check the London price, do your currency translation, and enter a limit order for within a ...

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