Few companies in the world can boast that 2.5bn people use their products every day. This is a select club you only get to enter after decades of putting the customer first and producing products to enhance everyday life.
Unilever (LSE: ULVR) has been able to reach this goal by building a strong reputation for its brand and products. The company specialises in food, cleaning and personal hygiene products, three everyday essentials that need to be just right to build consumer confidence.
Luckily, the business has a history of working with its customers to build the right products and meet concerns, that’s why Unilever has been able to succeed where many fail.
Building the brand
There’s more to Unilever than just being a profitable company. The business is responsible and charitable, two efforts that might compress profit margins but these efforts help build the brand in a way traditional marketing efforts never will.
For example, one of the company’s strategic goals is to “help more than a billion people to improve their health and well-being,” which is good for global development and introduces Unilever’s products to a billion more customers.
Management is pushing forward other initiatives to help build the brand such as the Unilever Young Entrepreneurs Awards, reducing water consumption and sustainable sourcing.
Improving the lives of all stakeholders of the business has always been a crucial part of its vision, and while this may have hit profit margins, it has ensured that customer trust towards the firm has remained. This is more important than ever today. Customers (especially the under-30s) are increasingly changing their buying habits towards responsible businesses that have a positive message.
Worth a premium valuation
Corporate responsibility is the main reason why I believe Unilever is one of the best buy-and-hold stocks you can invest in today. The company has a global presence, sells an essential range of goods and is investing in its corporate image to remain relevant. Couple these factors with a continually growing global population and the rising wealth of the middle classes in Asia and you have a potent combination.
Shares in the company currently trade at a forward P/E of 21.5, which is around the five-year average and is not a high price to pay for such a defensive business (although some might disagree). Earnings per share are expected to expand by 20% this year, and 10% for next, giving a 2018 forward P/E of 19.5. As well as this growth, the stock supports a dividend yield of 3%, and the payout is covered 1.5 times by earnings per share.
So overall, Unilever is a highly defensive business that’s working for the future, and that’s why I believe that you can buy and hold the stock for the next two-and-a-half decades as it continues on its growth trajectory.
