Tuesday, March 08, 2005
We have recently begun to nibble on Nestle-NSRGY, $69.59 (ADR), the Swiss food giant. Nestle is under the radar for most US investors because it is not followed by many US research firms(only two), and it's daily trading volume is relatively low. Having said this, it is a powerhouse of a company. Nestle does approximately equal business in the US, Europe, and the Far East. It is a leader in Ice Cream (Dryers and Hagen-Dazs), Candy (Lifesavers, Nestle, and Kit Kat), Pet Food (Purina and Alpo), bottled water (Perrier, San Pellegrino, Arrowhead, Calistoga), and Coffee (Taster's Choice and Nescafe). It also has holding in Alcon and L'Oreal. Nestle earns our Dividend Star status by having increased its dividend for at least the last 10 years in a row. It has a current dividend yield of just over 2%, and the dividend has grown by over 17% per year over the past 5 years. It is trading at 17X 2005 earnings, and they recently announced they will initiate a program to retire shares. Finally, it is one of the few companies in the world to earn the AAA rating for financial strength. Of particular note, our research shows it is negatively correlated to rising interest rates. That means, historically, its price has risen in periods of rising interest rates. Sweet, very sweet.