From Royalty Exchange: Usually they auction music royalties, but this is the first time I’ve seen a consumer product. Just sharing this because it’s fascinating, not as advice to invest!
This royalty stems from an 1881 agreement related to Listerine Antiseptic. The inventor, Dr. JJ Lawrence, licensed the formula to J.W. Lambert. The deal guaranteed perpetual royalties based on sales—forever. It was upheld in a 1959 court case.
Key Points:
The royalties are based on gross sales of Listerine.
Payments are monthly for U.S. sales and quarterly for international sales.
This agreement has been paying out for 142 years and continues to this day.
Current Auction:
The share being sold generated ~$2,500 in the past year.
The minimum bid is $71,000, meaning a return timeframe of around 30 years at the current payout rate.
Similar Sale: Another Listerine royalty share sold for 31x last 12 months’ earnings.
It’s fascinating to think about the history and how long agreements like this can last!
It’s frustrating that they don’t list how many total shares exist. Based on the payout, it seems like there must be a lot. This feels more like a stable, long-term play, which is why pensions and similar entities probably hold it.
Greer said: @Hartley
You’d be betting that demand for Listerine skyrockets in the future. Who knows, maybe it’s the cure for the next big pandemic.
But is it tied to a specific formulation? Alcohol-based mouthwashes are being phased out due to cancer risks. If formulations change, do the royalties stay the same?
If the royalty is a flat amount per ounce sold, inflation seems like a big risk. A 31x multiple doesn’t make sense—essentially a 3.2% yield that inflation will eat away at.
Tan said:
If the royalty is a flat amount per ounce sold, inflation seems like a big risk. A 31x multiple doesn’t make sense—essentially a 3.2% yield that inflation will eat away at.
At first, I thought it was tied to revenue, which would adjust with inflation, but it’s based on volume sold. That makes it far less appealing.
Ben said:
How do you even get a share? Can you buy into Johnson & Johnson?
JNJ spun off its consumer products into Kenvue. But this royalty deal seems separate from that. Probably the only way to get a share is to inherit or buy one on a niche market like this.
This is basically a perpetual dividend. But it doesn’t seem much better than owning stock in a stable, dividend-paying company like Bank of Montreal, which has paid dividends since 1829.
I feel like demand for mouthwash is going down. Fewer people rinse after brushing, and social habits have changed. Less concern about bad breath when you’re home all the time.