One of the great investing stories of the 20th century was the growth of the consumer in Europe and America. I firmly believe that one of the great investing stories of the 21st century will be the growth of the consumer in Asia, Africa and Latin America.

The expansion of the consumer society across the world is an unstoppable trend, and one that investors should buy into.

Look at a share price graph of Unilever (LSE: ULVR) and Reckitt Benckiser (LSE: RB) and the chart just goes in one direction, upwards. Both these companies have seen their share prices, and their dividends, rocket. That’s why they look relatively expensive. But is there more to come from these dividend dynamos, or are we too late to the party?


Take Unilever first. This company has been making consumer products for the best part of a century. From its early days making Sunlight soap, it now sells numerous products, from Dove and VO5 to Flora and Ben & Jerry’s. This is a huge company, employing 170,000 people and with a turnover of £40bn.

And this company has bet on expansion from its old strongholds of the US and Europe, out to China, India and other emerging markets. And this is what has been driving this company’s growth in profits and its share price.

And the growth shows no signs of stopping. In 2016 the firm is expected to make £6bn of pre-tax profits. That’s why the share price has risen so much. The 2016 P/E ratio is predicted to be 21.03, with a dividend yield of 3.03%. The numbers in 2017 are 20.08 and 3.17%. Compared to other stocks, that looks expensive. But I think there remains much untapped growth in emerging markets. As these countries get richer, their citizens will start to look beyond basic food and staples to the premium products that Unilever sells. That means there’s scope for further growth decades into the future.

Reckitt Benckiser

Compared to Unilever, Reckitt Benckiser is a much younger company, and most of its sales still come from developed markets. But it has seen even faster growth in earnings and share price over the past two decades. It sells products ranging from Cillit Bang to Strepsils. You could argue that sales are reaching a plateau in developed markets, but it’s planning a big move into emerging markets. This should ensure continued growth for years to come.

The 2016 P/E ratio is forecast to be 23.97, with a dividend yield of 2.11%. In 2017 analysts expect a P/E ratio of 22.10, with a dividend yield of 2.28%. The slightly higher rating is justified by the faster growth rate.

Expansion into emerging markets can be transformational. In the 1950s a young Warren Buffett bought into Coca-Cola. At the time this firm’s sales were mainly in the US, and people were sceptical that this purveyor of flavoured, sugared water could take over the world. Half a century later, this company has turned into one of Buffett’s best investments. I’m confident that if you make Unilever and Reckitt Benckiser part of your long-term investment portfolio, you won’t be disappointed.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.