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.

 

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.

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