Why Are Reckitt Shares Cheap?

VIDEO: The latest in our video series looks at Reckitt, whose shares have fallen this summer

James Gard 6 September, 2021 | 10:36AM
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James Gard: Each week we look at one stock that is cheap or expensive and why. This week is the turn of consumer healthcare firm Reckitt, which has a 4-star rating from Morningstar analysts.

Reckitt makes household products like Dettol and Cillit Bang, whose sales soared during the pandemic as people upped their cleaning routines. Shares in Reckitt boomed last year as a result but have slumped after the latest set of results in July as the company warned of the rising costs of raw materials.

Morningstar analysts that this sell-off was an overreaction and has created an attractive entry point for new investors. Reckitt is a strong business with a wide economic moat, they say, and is better positioned than most to pass on these costs to customers. They assign a fair value of £65 to Reckitt shares, but they are currently trading at £56.

Reckitt shares are also attractive from an income perspective. The company has been raising its dividend for a number of years, and maintained this record even during the 2020 crisis. Reckitt is about to pay its interim dividend of 73p per share and it yields over 3% now.  

For Morningstar, I’m James Gard

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard

James Gard  is senior editor for Morningstar.co.uk


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