The brilliant blue-chip I’m discussing here is one which I’ve been happy to spend my own cash on: Unilever (LSE: ULVR).
Since its formation 90 years ago through the union of Britain’s Lever Brothers and Dutch spread manufacturer Margarine Unie, this FTSE 100 firm has gone from strength to strength, moving beyond its continental borders through a mixture of acquisitions and good old-fashioned organic expansion.
A staggering sales record
Right now, Unilever has a product range encompassing more than 400 brands which are used by a jaw-dropping 2.5bn people across the globe EVERY DAY. The key to this popularity? The wide variety of product ranges in which it operates, from ice cream and shower gel, through to bleach and laundry detergent, and the intense pulling power of these brands.
Kantar Worldpanel’s latest ‘Brand Footprint’ chronicling the world’s most-demanded labels illustrated perfectly the beloved nature of the Footsie firm’s labels. Of the 17 fast-moving consumer goods (FMCG) brands which are bought 1bn times or more each year, Unilever is proprietor to six. And its Lifebuoy soaps, Sunsilk shampoos, and Knorr food flavourings all sit inside the top 10 most popular brands on this list.
Another healthy acquisition
The enduring appeal of Unilever’s labels over the years then should give you the confidence to buy the FTSE 100 business in expectation of strong and sustained earnings (and consequently dividend) growth many years into the future.
If you’re not convinced though, there’s another particular reason why I’m excited by its profits outlook in the near-term and beyond. It’s the company’s rising might in the consumer health category, an arena which is growing at a rapid pace because of growing health awareness in emerging markets and rising spending power in these regions.
Back in December, Unilever bought out GlaxosmithKline’s health food drinks portfolio, comprising the likes of Horlicks and Boost, in India and a swathe of other fast-growing Asian countries. These products generated cumulative turnover of €550m last year, and demographic changes in these regions should keep sales pounding higher (Horlicks has grown at a double-digit rate over the past decade and a half).
A lifeboat in tough times
Now no-one is pretending that the trading environment won’t be tough for the consumer goods manufacturers in 2019, and possibly beyond. Both Unilever and rival Reckitt Benckiser have recently bemoaned the “challenging” market conditions that are impacting trade at the present time.
It’s reassuring then that despite these travails the City still expects the aforementioned strength of Unilever’s brands to continue delivering chunky earnings growth (by 9% in 2019 and 11% next year, more specifically).
And so this resilient hero is expected to continue on its path of raising dividends too, resulting in chubby yields of 3.4% and 3.7% for this year and next. If you’re searching for safe-havens that should deliver knockout shareholder returns in the years ahead, I believe that this big-cap is one of the best to buy right now.
Royston Wild owns shares of Unilever. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.