Here’s a company whose products you’d definitely find around your household as a Malaysian. Boasting a huge range of food products, NESTLE has its tentacles everywhere.
While NESTLE has had to deal with its fair share of criticisms (aka the Milo incident), it has bounced back from it with a range of new products. And new profits.
Nestle Malaysia 2017 Annual ReportThis here analysis is based on NESTLE’s 2017 annual report which can be downloaded here: nestle_annual_report_2017
Being awarded the ‘Highest Return on Equity Over the Past Three Years’ is no small feat.
NESTLE AGMAlso, NESTLE had quite a turnout at this year’s AGM with a very supportive base of shareholders.
I’ve got videos of the fun-filled fare up on my instagram.
Understanding the Business and its Products
You would’ve been living under a rock if you fail to recognise just one of these household names. The products shown here has crept into the lives of Malaysians since we were children.
Let me paint you a picture.
You’ve had Nestle Milk when you were young. You remember the Milo trucks parked at your school compound serving free cups of chocolate goodness. You somehow recall that annoying Mat Kool song cruising round your neighbourhood.
And as you got older, you went to college where you had to tighten your belt and save some money so you filled your stomach with Maggi for breakfast, lunch and dinner. You stayed up late at night studying, buzzed on Nescafe.
What’s next you say?
You get a new job at some high-flying company, what’s that coffee machine you find in your pantry? Nestle again. Your boss pays Nestle every month to keep the machines churning. You enjoyed late night outs with your friends and colleagues at the mamak. Guess what your resident Ah-ne uses in his food and drink? Nestle.
Hell, you even remember them ‘Take a Break, Take a Kit Kat’ ads! Your parents and grandparents are probably taking Nestum in the morning and Omega at night for their bones and stuff.
My point being, Nestle’s products are here to stay for the foreseeable future. And you my friend, have been lining the pockets of NESTLE shareholders since you were 5.
Facts and Figures
Investor’s realized the value of NESTLE in 2018, in a huge way. The company’s stock price has almost doubled since 2017, despite their latest Milo Incident.
I do not foresee any big jumps in the share price in the near future. Neither do I see too big of a dip for the company. At the current price of RM147.90, NESTLE’s dividend yield is below 2% the mark. My dividend yield for the stock, because I bought it at an average price of RM66.88 is at 4.04%.
NESTLE has had a continuous increase in net profit since 2014. As a rule of thumb, companies offering food products like Nestle are able to keep up with inflation.
Dividend Growth PerspectiveNESTLE has been paying dividends consistently. I’ve held the shares since 2014.
Dividend yield was at 4.56% (2015), 4.04% (2016) and 4.04% (2017). However, with the sudden surge in share price and company growth, we should see dividends increase over the coming years.
Investors shouldn’t expect this metric to go sky-high since growth in the industry is somewhat limited.
ValuationWith the recent price increase, NESTLE is trading at 53.71 P/E.
They’re currently overvalued in my opinion. With everything factored in, I would definitely wait on this stock. Dividend history isn’t there to back up a strong buy signal.
An added note, I’m sure I’ll get many comments and messages saying Nestle is ‘expensive’. Technically it is because to buy the minimum number of 100 shares, you’d have to pay RM147.90 * 100, which comes up to RM14,790 at the current price.
However, if you’re serious about investing, get serious about saving your money. NESTLE is a worthwhile investment and it has been an invaluable defensive stock in my portfolio.
Bought Price – RM66.88
Current Price – RM147.90
Capital Gain – 121.14%
Total 2018 Dividends – RM410 (so far)
Dividend Yield – 3.07%
Disclosure: I hold 200 units of NESTLE shares in my Freedom Fund portfolio. At its current trading price of RM147.90, I’m up 121% on the stock.
I will continue to hold onto my Nestle stocks for now, without adding any to the portfolio.
As always, my opinions and strategies are never intended to be a buy/sell recommendation. The strategy used has worked for me and it is for you to decide if it can be implemented into your own financial plan. Always do your own research and due diligence before investing.
A list of good dividend stocks in Malaysia can be found hERE.