Unilever: The One Share That I Would Trust With My Life
May 3rd 2013 8:04PM
Updated May 4th 2013 12:00AM
LONDON -- Unilever is an Anglo-Dutch consumer goods giant. The company was formed in 1930 and today employs more than 100,000 people. It is the seventh-largest company in the FTSE 100 by market capitalization.
The largest part of Unilever is its personal-care business, owning brands such as Brylcreem, Lynx, Dove, and Timotei. Second is the foods division: Hellmann's, Knorr, and Pot Noodle are all Unilever brands. Then there are household products such as Persil, Cif, and Domestos.
These brands are a crucial part of Unilever's success. For supermarkets, they are must-stock products. This helps to secure favourable terms for Unilever.
For consumers, Unilever's brands are well known and loved. This makes it very difficult and expensive for other products to compete.
Unilever is one of the strongest companies on the market today.
Income investors want shares that are able to increase their dividends faster than inflation. This means that the income stream produced becomes more valuable to the shareholder year after year.
For 2012, Unilever paid its shareholders total dividends of 78.9 pence per share. Ten years ago, that payout was 16.0 pence. This means that in the last decade, Unilever has been increasing its shareholder dividend at an average rate of 17.3% per year.
Unilever is forecast to increase its dividend 5.2% this year, followed by another 10.1% increase for 2014.
Success like Unilever's comes at a price. Today, the shares trade on 21.1 times 2012 earnings. That's a huge premium to the average FTSE 100 share, which trades at around 16.5 times most recent earnings. Significant earnings growth is expected. Analysts are forecasting a 6.9% earnings-per-share increase for 2013, followed by a 9.9% rise next year. The dividend is forecast to grow at a similar rate, meaning that the shares today trade on a 2014 P/E of 17.9, with a forecast yield of 3.4%.
Unilever's broad portfolio of leading brands brings a high degree of future earnings visibility. Unlike many other blue chips, there is no single part of the company that could cause big problems for the shareholders. Combine that with enormous economies of scale and, if I had to name one, Unilever would be my multidecade hold.
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The article Unilever: The One Share That I Would Trust With My Life originally appeared on Fool.com.David O'Hara does not own shares in any of the above companies. The Motley Fool recommends Unilever. Try any of our Foolish newsletter services free for 30 days. 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.
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