Seeking Alpha
, VIN COLBY (14 clicks)
Long only, dividend growth investing, large-cap, mega-cap
Profile| Send Message|
( followers)  

Companies producing luxury goods have more than a few things going for them in today's crazy world. The differences between the incomes of rich and poor in America, as well as on the global stage, are widening. While there are calls from a Kremlin financed US TV network RT to outlaw the billionaires, such a thing is very unlikely to happen.

The current global economic system originates from the renaissance of capital that occurred in the eighties under the leadership of figureheads Reagan and Thatcher. The point of such a system is to organize the entirety of profitable economic activity under large privately controlled corporations owned by billionaires. The age since 1980 has, because of that fact, been very good for holders of stock in publicly traded enterprises. A glance at the S&P 500 index since 1980 will suffice to confirm my statement:

(click to enlarge)

Source: msn.com

The chart above illustrates the ascent of the S&P from 113 to 1.426, that's 12.6 times since 1980, or about 8.5% compounded annually. And that does not include the most beautiful thing about owning stocks - dividends.

In many countries, including France, the last 30 years were an era of large scale privatization of previously socially owned, or under utilized assets. The list, below, listing the richest people in France speaks volumes:

#

Name

Net Worth (USD billions)

Citizenship

Source of Wealth

1

Bernard Arnault

$41.0 billion

France

LVMH

2

Liliane Bettencourt

$24 billion

France

L'Oréal

3

François Pinault & family

$13 billion

France

PPR

4

Serge Dassault & family

$9.9 billion

France

Dassault

5

Alain and Gérard Wertheimer

$7.5 billion

France

Chanel

Source: Forbes.com

The Arnault and Pinault fortunes are noveaux riches, they have managed to gather valuable luxury brands during the last few decades all over France, Italy and Switzerland into their respective companies. LVMH (OTCPK:LVMUY, OTCPK:LVMHF) and PPR (OTC:PPRUF) can be seen as investment funds investing in some of the most profitable and enduring brands in the world.

Bettencourt, Dassault and Wertheimer are all old money, but, intriguingly, all the 5 biggest fortunes in France, apart from Dassault, originate from beauty and luxury products, things for which France is justly renowned throughout the world.

I will start this list with a British luxury company as a little diversification from the Latin countries is required. Let the numbers speak for themselves.

1) Burberry Group PLC (OTCPK:BBRYF)

  • Current dividend yield: 2.06%
  • Annualized growth in total cash dividend paid since 2008: 19.45%
  • Annualized growth in EPS (earnings per share) - last 5 years: 18.00%
  • Number of shares in 2012 / number of shares in 2008 = 100.93%

Burberry Group PLC Cash Flow

Fiscal Year Ending Mar 31

2012

2011

2010

2009

2008

Total cash from operations (millions GBP)

374

265

369

210

45

Total cash from investing (millions GBP)

(177)

(160)

(65)

(90)

(30)

Free Cash Flow - FCF (millions GBP)

197

105

304

120

15

Net income (millions GBP)

263

210

81

(6.00)

135

Total cash dividends paid (millions GBP)

(96)

(67)

(53)

(52)

(47)

FCF / cash dividends paid

2.05

1.56

5.73

2,30

-

Issuance (retirement) of stock, net (millions GBP)

(60)

(5.50)

(3.50)

(5.20)

(36)

Basic/primary weighted average shares (millions)

436

435

433

431

432

Source: ft.com

Brands

Burberry operates under 4 brands:

  • Burberry Prorsum - Base line for other brands.
  • Burberry London - Heritage outerwear 'wear to work' items, including business wear.
  • Burberry Brit - The most accessible of the Burberry brands, with entry level pricing.
  • Burberry Sport - A sports brand, including ski-wear and other sports apparel.

Burberry also has two regional brands for the Japanese and Korean market:

  • Burberry Black Label
  • Burberry Blue Label

2) LVMH Moet Hennessy Louis Vuitton SA (LVMUY.PK, LVMHF.PK)

  • Current dividend yield: 2.05%
  • Annualized growth in total cash dividend paid since 2008: 11.72%
  • Annualized growth in EPS (earnings per share) - last 5 years: 10.91%
  • Number of shares in 2011 / number of shares in 2007 = 103.16%

LVMH Moet Hennessy Louis Vuitton SA Cash Flow

Fiscal Year Ending Dec 31

2011

2010

2009

2008

2007

Total cash from operations (millions EUR)

3,907

4,049

2,934

2,278

2,458

Total cash from investing (millions EUR)

(3,016)

(2,691)

(1,051)

(1,560)

(1,293)

Free Cash Flow - FCF (millions EUR)

891

1.358

1.883

718

1.165

Net income (millions EUR)

3,065

3,032

1,755

2,026

2,025

Total cash dividends paid (millions EUR)

(1,069)

(953)

(758)

(758)

(686)

FCF / cash dividends paid

0.83

1.42

2.48

0.94

1.67

Issuance (retirement) of stock, net (millions EUR)

99

276

75

(134)

15

Basic/primary weighted average shares (millions)

489

477

474

474

474

Source: ft.com

Brands

SectorCompanies
Wines and SpiritsMoët et Chandon, Krug, Veuve Clicquot, Mercier, Château d'Yquem, Hennessy, Glenmorangie, Belvedere, Ardbeg, Domaine Chandon California, Ruinart, 10 Cane
Fashion and Leather GoodsFendi, Donna Karan, Emilio Pucci, Givenchy, Kenzo, Berluti, Moynat, Louis Vuitton, Marc Jacobs, Loewe, Céline, Thomas Pink
Perfumes and CosmeticsAcqua di Parma, Parfums Christian Dior, Guerlain
Watches and JewelryBulgari, TAG Heuer, Zenith, Hublot, Chaumet
Selective RetailingSephora, DFS, Le Bon Marché

3) PPR SA (OTC:PPRUF)

  • Current dividend yield: 2.24%
  • Annualized growth in total cash dividend paid since 2008: 3.45%
  • Annualized growth in EPS (earnings per share) - last 5 years: 1.60%
  • Number of shares in 2011 / number of shares in 2007 = 98.45%

PPR SA Cash Flow

Fiscal Year Ending Dec 31

2011

2010

2009

2008

2007

Total cash from operations (millions EUR)

1,332

1,264

1,448

1,370

1,904

Total cash from investing (millions EUR)

402

79

542

678

(3,562)

Free Cash Flow - FCF (millions EUR)

1.734

1.343

2.048

2.048

(1.658)

Net income (millions EUR)

986

965

951

921

922

Total cash dividends paid (millions EUR)

(441)

(417)

(417)

(434)

(385)

FCF / cash dividends paid

3.93

3.22

4.91

4.72

-

Issuance (retirement) of stock, net (millions EUR)

(444)

(99)

(49)

(470)

(155)

Basic/primary weighted average shares (millions)

126

127

126

126

128

Source: ft.com

Brands

PPR is made up of four operational branches: Luxury, Sport & Lifestyle, Fnac and Redcats. In 2012, the main brands of the Group are:

  • The Luxury division comprising brands which design, make and sell luxury products, especially in the leather-good, shoe, ready-to-wear, watches and jewellery sectors. The brands are Gucci (100% share), Yves Saint Laurent (100% share), Sergio Rossi (100%), Boucheron (100% share), Bottega Veneta (100% share), Stella McCartney ( 50% share), Alexander McQueen (51% share), Brioni (100% share), and Sowind Group (51% share) with Girard-Perregaux and JeanRichard
  • The 'Sport & Lifestyle' division comprises Puma (75% share),apparel brand Tretorn and golf equipment specialist Cobra Golf, action sport brand Volcom (100% share) and Electric
  • Redcats (100% share) is an American and European group of brands specialized in home shopping on the Internet. The brands are : La Redoute, Ellos, Brylane, Cyrillus, Vertbaudet, Somewhere, Daxon, Chadwick's and Castaluna, OneStopPlus.com, BrylaneHome, Woman Within, Jessica London, Roaman's, King Size, The Sportsman's Guide and The Golfwarehouse.
  • Fnac (100% share) is a leader in retailing, specialized in cultural goods (music, literature, cinema and video games), and electronics (Hi-Fi, computers, television) in France and in six countries including Belgium, Spain, Portugal, Brazil, Switzerland
Source: 3 Global Luxury Dividend Stocks To Buy And Hold Forever