Check out this picture.
This is what it looks like in my home. Well, except from the boy sitting on the kitchen counter. No one is sitting on counters in my home. Gotta have a little order! What I’m talking about right now are the milk products on the table. I always start my day with a cup of coffee with some soy milk. After I do a physical work out, I drink a protein shake based on almond milk. So I was always bound to own the company that’s literally fueling my day!
Danone SA (Equiduct: BNp) (ADR: DANOY)
Danone is a French food and drink producer, especially milk products. Their dairy and plant-based brands include Danonino, Activia, Actimel and Alpro. They also make waters and various specialized nutrition. Market cap is about 42 billion USD and they are the world leader with their dairy and plant-based products. They have high exposure to the US, to China and of course to sweet home Europe.
This is a company with a very healthy profile. They state their mission as “bringing health through food to as many people as possible”. Sounds to me like they understand how to make money while also promoting wellbeing.
Furthermore, Danone has a zero carbon neutrality programme. They are into regenerative agriculture. They have a water strategy aimed at preservation, circularity and safety. They have several social funds. If you’re not getting it by now, my point is that Danone has a very positive profile and young people today and the people of the future will look favorable upon this company.
Selected financial metrics (in euro)
Here we see a stable revenue growth and also growth in the profit albeit a bit more uneven.
Profit margin has increased slightly over these years and book value are steadily rising.
Equity ratio seems to be slowly decreasing so investors will want to keep an eye on this going forward.
Danone is not writing or talking so much about their dividend. While this is disappointing, I feel it’s pretty common that European companies – compared to their American counterparts – take a more ‘modest’ approach to dividends. At least in their communication outwards. That being said, Danone has paid a dividend since the eighties.
Above you also see the dividend for the last couple of years.
2,1 EUR makes the current yield about 3,8 %. Forward yield is most probably higher. When you plot the dividend chart since the late eighties, it’s clear that this is a dividend growth company. The growth is kind of uneven, though. CAGR for the last 5 years is about 5 % which is nothing to be ashamed about.
Regarding dividend safety, the current payout ratio is about 55 %. A very healthy number.
Why I Invest
Danone is a small position in my Dividend Portfolio. It would be nice to see even better financials going forward, for example an increased equity ratio and a faster rate of increased revenues and profit. However, I love to own companies that make stuff I personally use and enjoy. I buy these plant based products basically every day. This company is also riding the global mega trend of healthy living and make an effort of taking their social responsibility.
They are the world leader in their large (and growing) niche, they operate in the safe industry of consumer staples, and they pay an ever growing dividend.
This stock also might actually be a value right now. Year to date the stock is down 25 % and hasn’t recovered from the corona crash. The current yield of 3,8 % is pretty much the highest it’s been for 10 years. While the business has been affected by Covid19 along with the rest of the world, they haven’t lost 25 % of their earnings or lost 25 % of the company.
Time for a coffee! Do you take yours with soy milk or “black as a midnight on a moonless night”?