Consumer staples giants ‘to be valued like risky bonds’

Bloomberg

Consumer staples companies such as Reckitt Benckiser Group Plc and Procter & Gamble Co. should be paying higher dividends to compensate investors for increasing levels of risk, according to the head of a fund that’s beaten 99 percent of peers in 2018.
Reckitt’s dividend yield of 2.8 percent and P&G’s of 3.4 percent is similar to the 2.9 percent on US 10-year government bonds, though these would need to be closer to high-yield debt to tempt Stephen Yiu, chief investment officer at London-based Blue Whale Capital LLP. The makers of products including Dettol cleaners and Gillette razors are facing increased structural pressure due to the growth of online and discount retailers, he said. “If a company doesn’t grow, has margin pressure and has a dividend yield of 3 percent, that isn’t good value,” Yiu said.