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Here’s why I’d buy and hold this FTSE 100 giant for years

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Despite a period of volatility for the FTSE 100 during the last year, since the beginning of 2019, the primary UK stock index has bounced back strongly as some of its biggest constituents have fought back despite Brexit uncertainty.

However, I do think that if the political situation surrounding the UK’s departure from Europe had been settled by now, that growth could have been greater.

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For that reason if for no other, I believe it is important to hold shares in companies that are highly diversified across various industries and markets, with international exposure, and also able to resist volatility within the UK via products that are must-haves. There are few that fit the bill more than Unilever (LSE:ULVR).

The consumer goods company owns a wide variety of big-name brands that people worldwide use on a daily basis, including PG Tips, Dove and Vaseline.

Tea drinkers

Regardless of whether we end up with a hard or soft Brexit, I don’t think that people are going to stop drinking tea, or washing themselves, and the sheer range of products from Unilever that we use in our homes ensures that it has a significant slice of the consumer goods market.

One of the largest constituents of the FTSE 100 by market capitalisation, Unilever has developed a reputation as a producer of quality products, as well as a reputation for being a well-managed company from the top down.

That is highlighted in the consistency of its dividend payouts, in addition to the gradual increase in its dividend over the years.

Unilever’s full-year dividend for 2018 was €1.57 (3.3% yield), up from €1.45 in 2017 and €1.26 in 2016. All suggestions from the board are that this shareholder payout will increase further in 2019.

Drunk Elephant

Despite the extensive range of brands under its portfolio, Unilever has shown recently that it is not willing to rest on its laurels. It has made a number of key acquisitions and is reportedly considering the purchase of US skincare company Drunk Elephant.

According to The Sunday Telegraph, the FTSE 100 giant is weighing up a $1bn bid for the fast-growing brand, which has made a name for itself as a seller of mainly-natural skincare products, rejecting ‘toxic’ ingredients.

With a price-to-earnings ratio of 22, the stock could be seen as overvalued, but this is where that international exposure counts as I see on-going growth potential for the company as its brands continue to prosper in emerging markets.

Quarterly results posted in April were positive, despite a cautious tone being struck by new CEO Alan Jope at the start of 2019.

He had said that underlying sales growth would be at the bottom of the firm’s guidance for 2019 due to “challenging” market conditions. Underlying sales rose 3.1% in Q1, and although this was at the bottom end of the company’s growth forecasts, it was still higher than analysts had expected due to a boost in those emerging markets.

Long-term stability and brand superpower? For me it means it should continue to be a stock that provides healthy returns for years to come

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Conor Coyle has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended 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.

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