The Reckitt Benckiser (LSE: RB) share price jumped almost 2% today as sales of its cleaning products surged in the pandemic. I’m delighted by its success, because I have been tipping the household goods company for years.
This is a great defensive stock because it sells everyday items that people still need in a recession, such as cleaning products, stain removers, headache pills, throat sweets and dishwasher tablets.
This FTSE 100 giant has done particularly well in the pandemic, as consumers prioritised hygiene, snapping up products such as Dettol and Lysol. This morning it reported 13.3% growth in like-for-like third-quarter sales, a figure most companies could only dream of right now. This was driven by “underlying operational improvements augmented by continued growth in our leading global disinfection brands”, the group said.
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Mean, clean FTSE 100 machine
The Reckitt Benckiser share price is cleaning up as sales rise 19.5% in its Hygiene division: driven by Lysol, Finish and Air Wick. This operation now accounts for 42% of sales. Like-for-like growth in its Health division stood at 12.6%, amid ongoing strong demand for Dettol.
Sales in its Nutrition unit grew at a slower pace of 4.1%, as it struggled with the birth pains associated with $18bn acquisition of baby formula specialist Mead Johnson.
Reckitt Benckiser is also expanding online sales, which rose 45% in the third quarter and more than 5o% year-t0-date. They now make up around 12% of group net revenue.
The group is investing £2bn into its hygiene, health and nutrition brands over three years, which should drive future share price growth. Management is also keeping a close eye on costs. Its expanded productivity programme has delivered savings of £300m so far this year.
I like the Reckitt Benckiser share price today
I am pleased to see Reckitt Benckiser’s share price success because I have regularly tipped it as a core portfolio holding.
Covid-19 may also trigger a long-term shift in attitudes towards towards cleanliness. If we all take hygiene theory seriously in future, the Reckitt Benckiser share price could continue to clean up. This is a global company, this has moved into 19 new markets so far this year. Today it upgraded revenue growth projections to low-double-digits for the year. Previously, it anticipated high-single-digits.
The share price may look expensive, with the stock trading at 20.7 times earnings. However, that is reasonable by its standards. Along with two other FTSE 100 favourites of mine, Diageo and Unilever, it typically trades closer to 24 times earnings.
Reckitt Benckiser has also stood by its dividends throughout the crisis. Right now it yields 2.4%, covered exactly twice by earnings. Management also has a good track record of steadily increasing payouts.
I would have bought Reckitt Benckiser shares five years ago, three years ago and one year ago. I’d buy it today too. Then I would aim to hold it for years for long-term income and growth.
