3 reasons Brambles Limited is a buy and hold forever share

The term ‘blue-chip’ in many ways gets used far too liberally – however Brambles Limited (ASX: BXB) is one company that arguably is truly deserving of this title.

Having spun-off its non-core records management business Recall in late 2013, Brambles’ management is now solely focused on maximising shareholder value in the pallet and container pooling businesses.

Despite a weak global economy, Brambles’ recent third quarter trading update highlights the strength of the firm’s supply-chain logistics offering. On a constant currency basis, growth in sales of 8% was achieved for the nine months to March 31.

Management also reaffirmed its earlier underlying profit guidance range of between US$1,015 million and US$1,035 million at 30 June 2015 exchange rates.

The share price has also responded positively, with the stock up around 19% in the past year. In fact, the share price is closing in on record highs set nearly a decade ago which included value ascribed to the Recall business.

Here are three reasons why Brambles deserves a long-term position in your portfolio.

  1. The company is set to continue to grow at an above average rate. One major reason investors can expect solid growth rates from Brambles is because of the value proposition the company provides to its customers. A key way of maintaining a market-leading position is to provide a service which is value-adding to your customers – the scale of Brambles’ pooling operations makes this a possibility.
  2. Much like packaging supplier Amcor Limited (ASX: AMC), Brambles’ diversified customer base provides a steady and sticky revenue stream. This base boosts the defensive characteristics of the stock and is one of the key reason Brambles meets the criteria of ‘blue chip.’
  3. As Brambles enjoys strong growth prospects a significant portion of profits are re-invested back into the company rather than paid out to shareholders in the form of dividends. While some investors are focussed on income, in reality a business which can compound retained earnings at an acceptable rate is an even better option. It also means that if, in the future, there are less growth opportunities available to management then the board can substantially raise the dividend.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.