Recent Buy: Solvay

Why the hell a recent stock buy? Am I not supposed to be an indexer? Maybe, I am especially in doubt at the moment. I wanted to tip my feet in the water to see how I would feel about DGI.

Solvay is one of the historical industrial companies of Belgium, founded in 1863 by Ernest Solvay and some friends and family. Their main focus at that time was ammonia-soda.

Fast forward to today. Solvay is a worldwide chemical player, active in all regions of the world and 4 core areas. Clients are well diversified in 7 sectors. The aerospace, car, energie and environment, food. Just to name a few.

Solar-Impulse-2

 

All of their technology is combined in the solar impulse. Together with some partners, the plan is to fly a solar powered airplane across the globe. The adventure is ongoing for more than 10 years already

 

 

The reasons for me to buy Solvay are

  • It is a solid dividend grower.

Some might say it has had periods in the last 30 years where the dividend did not grow. It is true. In some periods, the dividend remained the same for 2 or 3 years. That being said, the last 30 years, the CAGR was 5,7 pct and the pay out is about 40 pct. The last increase, if approved on May 10, will be 3,3 pct.

Dividend Growth of Solvay
Solvay Dividend growth (Source: Solvay.com)

The final dividend payment looks to be 1.4162 net. This means a yield on costs of about 1,55 pct. Not too bad for only 60 pct of the total dividend. The total yield would be 2,7 pct. Far better than the savings account I have.

  • It is Belgium based

My goal is not to create a home bias. It just means the dividend is taxed only once. This saves already 15pct. Also, If I want, I can attend the shareholder meeting. This would be a nice experience. A little bonus if you wish.

  • Beaten down, start to recover

The stock has lost quite some of its value, falling down from 132 EUR to approx 73 EUR, and now slowly recovering. In my opinion, this is due to a few items

Capital raising for the buy of Cytec.

Exposure to the oil sector. This could be impacting Solvays name. The total exposure they have to this sector seems to be relatively small.

Some analysts reports I read are rather bullish. The negative sentiment on the takeover seems to go away and now that oils starts to recover, the stock recovers as well. Next to that, the outlook is positive with an expected growth next year just below 10 pct and a free cash flow of 650M EUR with the dividend consuming approx 280M

 

This stock is now part of myplay portfolio. Maybe it can be the basis of my DGI portfolio that I plan to have one day. I think it is very complementary with my RDS.A holding. I go on the outlook now for a consumer staples stock. Let’s see what I can find.

Did you analyse Solvay lately?

The data for this article is mainly sourced from a family presentation they gave recently. Sorry, it is in French

 

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25 thoughts on “Recent Buy: Solvay

    1. That is indeed often the case. As long as the dividend stays where it is or grows, I will reach my goal to earn more than on a savings account. The expected cash flow looks good for 2016 at least.

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  1. Interesting. Looks like it’s down 18% from its high in November. Not a bad P/E ratio either. I wish I could look at its financials!

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  2. Why you choose Solvay and not Solvac, the listed family holding above Solvay? PE in the last weeks was better (not that it was a very big diference off course).

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      1. You can buy it with most of the Belgian based brokers I think (I use Medirect myself and they do all the hassle with the registration for me, about selling I must say I don’t know)

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          1. With some more research, when you are in for the long run, then Solvac seems to be better indeed. Thx uni vester for the tip. I migth consider Solvac when buying more

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  3. Look at you going all DGI! Nice move, seems like a solid dividend grower at a reasonable price. From personal experience, It gets quite addictive looking for dividend growth stocks. And once the dividends come in, it really starts to feel good!

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  4. hey ambertree!
    congratulation on taking action as a DGI! 🙂
    I never heard of that stock, but it looks like a nice and solid dividend payer 🙂

    best regards from austria

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  5. Hah welcome to the dark side 😉 So far I haven’t really looked closely at Solvay, it has a nice entry yield and relatively low payout ratio but with its ~3% dividend growth rate over the last two decades it hasn’t really popped on my radar yet.

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    1. The dark side… Great way to describe.
      Solvay is indeed a slow grower. I specially like the strong family control that offers some long term focus. The entry yield beats for sure the savings account return and I am positive to get some price growth over the next years.

      Liked by 1 person

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