Since the start of 2014, Unilever (LSE: ULVR) (NYSE: UL.US) has underperformed the FTSE 100 by 4%, with the wider index falling by 1.3% and Unilever dropping by 5.3%.
The main reason for this is doubts surrounding the sustainability of the emerging market growth story, with stocks such as Unilever (that rely on developing nations for the majority of their revenue) being hit harder than those stocks that are less reliant upon emerging markets.
However, Unilever’s long-term story still looks good and it could prove to be an investment that helps you retire early.
Certainly, emerging markets are going to be volatile and the path to developed nation status is not going to be a smooth one. Therefore, doubts about the growth story and the subsequent dips created in the share price of companies that are focused on emerging markets provides a great opportunity for longer term investors to buy in.
Furthermore, Unilever is now coming back into a price range where income-seeking investors should pay attention to it. Indeed, Unilever currently yields 3.9% and, when the current levels of bank account savings rates and inflation are taken into account, this suddenly looks very tempting.
Moreover, Unilever now offers a premium yield to that of the FTSE 100, with the wider index having an average yield of 3.5%. This puts Unilever’s yield on a 0.4% (or 11%) premium to the wider index, with Unilever’s yield continuing to be well-covered at 1.4x.
In addition, Unilever continues to benefit from a diverse portfolio of consumer products and is steadily building customer loyalty in the developing as well as developed world. As with all brand-building, this comes at a great cost to the company and, crucially, the effect of relatively high marketing and advertising spend is difficult to observe in the short term.
However, Unilever continues to build its brands in developing nations and stands to benefit from increased wealth in those countries, as many of its products are discretionary, luxury items that should be highly correlated with an improved macroeconomic outlook for developing regions.
As such, the long term picture still looks attractive for Unilever and, as such, it could be a stock that helps you to retire early.
