Unilever (LSE: ULVR) is a consumer goods company that manufactures food and beverages, beauty products, cleaning agents and personal care products. The eighth most valuable company in Europe, ULVR has excellent fundamental characteristics. While the FTSE 100 grew at the rate of 2% and 5% in the last year and over last three years, Unilever was up by 12% and 36% respectively.
The company’s products fall into a category that keeps sales ticking even in difficult times. Consumer goods including household staples never run out of demand and, on a typical day, a third of the world’s population will use a Unilever product. The manufacturer of Dove and Magnum ice cream has pledged to halve the use of plastic by 2025. It owns more than 400 brands and uses 700,000 tonnes of plastic every year. It has pledged to cut the absolute usage by 100,000 tonnes by switching to reusable packs.
The third-quarter sales increased by 2.9% and the turnover reached $14.7 billion as compared to $13.78 billion for the same period in the previous year. The beauty segment increased by 7%, home-care by 7.7% and food and refreshment by 3.5% during the quarter. The operating profit of the company has consistently grown since 2015. The earnings per share (EPS) growth was 62% in 2018 and the current EPS is 3.06.
Emerging markets sales growth was 5.1% and the turnover increased by 5.8%. Unilever has a forward price-to-earnings (P/E) ratio of 21.27 and a 3.04% dividend yield. The company had a dividend yield of 6.19% in 2018. The industry P/E ratio is 22.64, which shows that the company is better than most of its competitors in the industry.
Established dividend payer
The company has ample net income to cover the dividend payout and has been consistently increasing the dividend over the last decade, keeping investors happy. The free cash flow yield for the company in 2018 stood at 1.30%. The board declared a quarterly dividend of 35.76p, which is 6% ahead of the previous year. The company has consistently paid dividends since 2010. With constant earnings and revenue no matter the economic conditions, the company should be able to continue rewarding shareholders.
As the world gets more affluent, the demand for consumer goods should grow and it will eventually benefit Unilever. The stock is a good buy right now and one to hold forever. The company expects to continue underlying sales growth in the range of 3-5% and expects an improvement in the operating margin that will help generate adequate free cash flow for 2020.
If you are looking for one stock that can beat a market crash and come out strong, Unilever it is. You will continue earning through the regular dividend payouts and see strong growth in the stock over the coming years.
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Vandita does not own shares in Unilever. 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.
Motley Fool UK 2019