M&G's Rhodes' top five stocks and why he sold Coca-Cola

15 Feb 2012 | 10:25
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Stuart Rhodes, manager of the £1.7bn M&G Global Dividend fund, on five of his favourite stocks.

1. Spanish-listed company Prosegur is the dominant security service provider in Latin America. "We were able to get this at a cheap valuation because of the problems in Spain. It is a Spanish business however 75% of its profits or more come from Latin America," he said.

Prosegur recently said it will pay 0.26 euros ($0.33) per share as a third interim gross dividend, according to a regulatory filing.

2. Another company that benefited from its European listing and headquarters, Umicore is the largest platinum recycler in the world. Rhodes said he has been waiting for this business to reach a good price for two and a half years.

3. Procter & Gamble holds the record for increasing its dividend for 57 consecutive years. Rhodes said: "Very few companies in the UK even come close to matching this kind of dividend capability we see in the States. P&G generates billions and billions of free cash flow every year and spending billions of cash flow every year is quite difficult to do. One of the reasons it has this growing dividend policy is it embeds this natural discipline that stops the company wasting money."

4. The world's leading toy company Mattel is a an example of a recent purchase of a quality name where the valuation is still reasonable, according to Rhodes. 

5. Prosafe, a company Rhodes sees as an alternative way to play the oil space, is the fund's fifth largest holding at 3.1%.

And the one that got away:

Rhodes said he sold Coca-Cola last month because he could no longer justify holding the company based on its valuation. 

"It has been a phenomenal performer for us, but its yields are really in the twos and it is not growing its dividends that fast. Really you are just paying for safety and comfort with the name," he said.

"The gap that has opened up between Coca-Cola and a lot of other stable, sensible businesses just became too difficult for me to stomach and so we had to sell it."

 

Categories: Global

Topics: DividendsM&g

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