The new month has started on a down note. Yet I believe there are still plenty of FTSE 100 companies that may be well suited to a new coronavirus world where we may have an economic contraction. Today I’m taking a look at the share prices of consumer good giants Unilever (LSE:ULVR) and Reckitt Benckiser (LSE: RB) to see how £1,000 invested in each would have fared over the past five years and whether one or both might offer a path to riches in the years to come.
Reading the numbers
Under each company name below, you can see how the price has changed over the past five years and what this means in terms of the compound annual growth rate (CAGR). Then I’ve shown how £1,000 would have fared over five years.
Past share prices are for early May 2015. Current ones are closing prices on 4 May. I haven’t factored-in any brokerage commissions or taxes.
Please note that both FTSE 100 firms pay regular dividends. The calculation below doesn’t take into consideration the dividends or reinvesting that income.
Unilever
The share price has gone up from 2,894p to 4,054p. It means CAGR of 6.97%, so £1,000 would have increased to about £1,400.
Unilever’s current dividend yield stands at 3.5%. The shares are expected to go ex-dividend on 14 May.
On 23 April, Unilever released the results for Q1 when it posted flat first-quarter organic sales. As a result of the Covid-19 outbreak, the group has been adapting to new supply realities and demand patterns.
Management said that it’s seeing “upswings in sales of hygiene and in home food products, combined with some household stocking, and near cessation of out-of-home consumption which is particularly affecting our food service and ice cream business”.
Due to the current uncertainty, the packaged consumer goods giant withdrew 2020 sales and margin guidance. Year-to-date, ULVR stock is down about 5.8%.
Reckitt Benckiser
The share price has gone up from 5,845p to 6,586.14p. That’s a CAGR of 2.42% and means £1,000 would have increased to £1,127.
Reckitt Benckiser’s current dividend yield stands at 2.6%. The shares are expected to go ex-dividend in August.
On 30 April, the group also released Q1 results. Unlike Unilever though, it reported record quarterly sales growth.
The robust results were led by increased demand for many of its hygiene products, such as Dettol and Lysol, as well as health products, including Mucinex, Nurofen, and VMS.
As a result, management now expects the 2020 performance to be better than original expectations. So far in the year, RK stock is up about 7.2%.
Investing in consumer stocks
I expect the volatility in the markets to continue in the coming weeks. Therefore I’d make defensive stocks part of any long-term portfolio. A defensive company typically has a constant demand for its products or services. It isn’t correlated to the rest of the business cycle either.
Analysts regard consumer staples companies as defensive. People continue to buy household items, cleaning products, and other essentials such as personal hygiene products, even when their salaries are shrinking. And the viral outbreak means everyone must pay more attention to basic hygiene than before.
Either Unilever or Reckitt Benckiser feel to me like must-haves if you want a consumer defensive in your portfolio. Both have a wide range of well-known brands globally. I’d look to buy either stock, especially if there is any weakness in their respective share prices.
