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3 Reasons I’d Buy Unilever plc Today

Ten years’ ago, Unilever (LSE: ULVR) (NYSE: UL.US) was unloved and unappreciated by many investors, who were still recovering from their infatuation with high-tech stocks. Since then, Unilever’s share price has risen by 116%, while telecoms boom favourite Vodafone has gained just 58%, despite its recent strong performance.

I think that Unilever currently offers investors a great buying opportunity, and intend to buy more shares myself, for three key reasons.

1. Falling share price

Unilever’s share price has fallen by 14% since its May 22 peak, meaning that it has underperformed the FTSE 100 this year with a gain of just 4%, compared to nearly 11% for the blue chip index.

This is great news for Foolish investors, as it means that since May 22, Unilever’s prospective dividend yield has risen from 3.1% to 3.6%, while its 2013 forecast P/E has fallen from 21.2 to a more reasonable 18.

2. Rising profits and emerging markets

A falling share price doesn’t necessarily mean bad news. In its recent half-year results, Unilever reported underlying sales growth of 5%, and a 14% increase in operating profit. Better still, the firm’s core operating margin, which excludes one-off events such as acquisitions, rose by 0.4% to 14%.

Earlier this year, Unilever increased its shareholding in its Indian subsidiary, Hindustan Unilever, to 67%, increasing its exposure to one of the world’s largest emerging markets. Although the Indian economy is going through a difficult patch at the moment, I’m in no doubt that it in the long run, it will make a substantial contribution to global economic growth.

Unilever’s emerging market sales rose by 11.4% in 2012, taking their share of turnover to 55%. This is a trend I’m very happy to be invested in, as it provides long-term growth potential.

3. High quality income

Unilever’s dividend has risen every year since 1992, the earliest year for which I could find data.

What’s more, this is a real dividend, paid from surplus earnings. Unilever’s dividend has been covered by free cash flow since at least 2007, something that surprisingly few of its FTSE 100 peers have managed.

Although Unilever’s prospective yield of 3.6% isn’t the highest on the market, the firm’s track record of dividend increases and affordable payouts means it is one of the highest quality dividends you’ll find, and should provide a reliable, long-term income that keeps pace with inflation.

A market-beating habit

Buying companies like Unilever, with good long-term growth prospects and a proven dividend growth record, is one of the most reliable ways to beat the market.

It’s certainly a technique that has worked outstandingly well for top UK fund manager, Neil Woodford. If you’d invested £10,000 into Mr Woodford’s High Income fund in 1988, it would have been worth £193,000 at the end of 2012 — a 1,830% increase!

If you’d like access to an exclusive Fool report about Neil Woodford’s eight largest holdings, then I recommend you click here to download this free report, while it’s still available.

> Roland owns shares in Unilever and Vodafone. The Motley Fool has recommended Unilever and Vodafone.