After resolving my block for trading Pink Sheet stocks – my Merrill Edge Safepass arrived in the mail – I have finally moved forward with my Nestle purchase. The addition of the NSRGY ADR to my portfolio is a goal I’ve long targeted.
The bad news for me is that due to the delay caused by waiting on the security mechanism to arrive, the price of the security increased by roughly $5 per share. I had set my limit order to $68.00, and sat and waited for the purchase to trigger. While I would have preferred a sub $65 price – where it was trading a while back – I still feel it is attractive at sixty eight.
Nestle is a Swiss based firm, largely focused on the food industry, that has in the neighborhoods of 30 billion dollar brands. It is truly a huge company, and with the breadth and depth of its product offerings it will not be going away anytime soon. Amongst its chief competitors are General Mills, Kraft, and Kelloggs. The firm also has a large beverage division – particularly in the bottled water arena – so also competes to a certain extent with Coca Cola and Pepsico. As I have already purchased KO I now have multiple positions in the beverage industry.
While not a hugely popular holding for individual investors in the US, many people hold them in their 401k accounts due to its presence in a large number of major index funds. The main listing for the company is on the SIX Swiss Exchange, and one side effect of this is that many of the US based financial statistics aggregating sites have bad information for the firm. Sites like Yahoo finance and Google finance should not be relied upon for dividend data for these international firms, it is best to go direct to the source – i.e. the firms’ corporate website.
Nestle, being a non-US forms, has some unique characteristics that makes it different to my other holdings. For one, it only pays a dividend once a year, rather than every quarter. Also, the dividend is paid in Swiss Francs (CHF) which is of course converted into USD for the ADR.
This means the size of the dividend – and of course the price of the underlying security- will vary over the years depending on the underlying CHF-USD exchange rates. This does expose me to some foreign exchange risk, but since Nestle sells products worldwide I am not concerned about this. I had a lot of trouble finding accurate historical information on the Nestle Dividend, this is probably the best reference (straight from the source) as it eliminates confusion caused by taxes and currency conversions.
With this firm I am exposed to every currency – some of which will be strong and some weak in any given year. The major concern I would have is if I were forced to liquidate my position at a particularly unfavorable time – when the Dollar is weak against the Franc. I plan on holding this stock for life however.
Purchase of 37 shares of NSRGY at $67.98, for a cost basis of 2,515.26. Dividend yield at time of purchase 2.71%. Dividend Reinvestment enabled. Initial dividend income $67.17 annually. Note – this yield reflects 15% withholding. My research indicates I should get credit for this at tax time, if this proves to be the case I will come back and adjust the yield upwards accordingly.