In today's economy, the bigger the company, the better.
By offering a diverse range of products, businesses can reach a wider customer base.
The companies that do this the best are what we call the "Global Elite." These companies are usually the leaders in their industries and have well-known brand names.
These characteristics allow the Global Elite to dip their hands into almost every market in the world. That's not just great for sales... It also insulates them from weakness in any single economy or region.
And when it comes to having worldwide exposure, it's hard to beat food and beverage company Nestlé (OTC: NSRGY).
Nestlé's history dates back to 1866, making it one of the oldest Fortune Global 500 companies today.
Nestlé's founder, Henri Nestlé, developed a breakthrough product called farine lactée, a formula for babies who could not be breastfed. The product saved countless lives. And shortly afterward, the company expanded its products to chocolate, coffee, soup, yogurt, and water.
A century and a half later, Nestlé is the largest food and beverage company in the world. One billion people consume Nestlé products every day... bringing the company annual sales of nearly $94 billion.
In the U.S., the name Nestlé is often linked to its chocolate products, but the company owns many more brands than you may realize. In fact, Nestlé has begun selling some of its worst-performing businesses to focus on its highly profitable ones.
The company's largest segment is its beverages division, which sells ground coffee, Nespresso coffee capsules, and bottled water. The segment accounts for 24% of sales and 28% of operating income.
The second-largest segment is nutrition and health science, with about 18% of sales.
Nestlé has well-known food brands like Lean Cuisine, Stouffer's, Gerber baby food, Toll House chocolate chips, Coffee-Mate creamer, Friskies and Purina pet foods, and more.
The company diversifies across product lines, with no segment accounting for more than 25% of revenues.
Not only is its business diversified, but Nestlé also has a business that reaches all over the world.
The company is headquartered in Switzerland, but its sales span the globe, with 45% coming from the Americas. Around 29% come from Europe, the Middle East, and North Africa. Asia, Oceania, and sub-Saharan Africa account for the remaining 26%. In all, Nestlé enjoys a presence in more than 190 countries.
This diversified business model ensures that Nestlé produces steady sales and profits.
But it also has growth opportunities...
Last year, Nestlé entered into a partnership with coffee giant Starbucks (SBUX). Under the terms of the partnership, Nestlé can distribute Starbucks products across the globe.
That includes popular brands like Starbucks and Seattle's Best Coffee, as well as Teavana tea. These brands bring in more than $2 billion in annual sales, which means Nestlé now has an even larger, steady customer base.
Nestlé also has a deal in place to grow its online sales in China with e-commerce company Alibaba (BABA), considered to be the "Chinese Amazon."
See, China is one of the fastest-growing economies in the world. And it's a key market for Nestlé. The company is focusing on the Chinese middle class – expected to grow to more than 550 million by 2022, according to McKinsey & Company.
This will continue to add potential customers to the company's global reach.
So, Nestlé has a steady core business, with areas to grow even further. And that's great for the company's financials.
As mentioned above, Nestlé brought in almost $94 billion in sales last year. It has thick profit margins, which ensure steady and growing earnings.
$12 billion of the company's sales flowed down to free cash flow ("FCF"). We've long regarded FCF as our favorite metric because cash is the one item on the balance sheet you can't fake.
With so much FCF, Nestlé can reward its shareholders. Companies can do this either through share buybacks or dividends. Nestlé does both.
It currently boasts a dividend yield of 2.2% and returned more than $7 billion to shareholders through dividends last year.
Nestlé also repurchased a further $7 billion of its own shares.
Its stock performs just as well as its business...
So far in 2019, shares are up almost 40%. And they recently hit an all-time high.
Nestlé is a big, stable dividend payer. Its global reach ensures that it will always have a steady stream of customers. And it has great opportunities to be an even better performer for investors.
Sometimes investing is simple.