Since 1988, the FTSE 100 has quadrupled in value, and thats on top of providing dividend yields which currently average around 3% per year.
But thats nothing comparedto Unilever (LSE: ULVR), up by1,300% over the same period and with dividends better than3%.
Theres a 16% rise in earnings per share forecast for the current year, and first-half results released Thursday suggest the company is firmly on course.
Underlying sales grew by 3%, with underlying earnings per share up 14%, leading chief executive Paul Polman to enthuse: Our first half results show continued growth well ahead of our markets and a substantial step-up in profitability despite the persisting volatile global trading environment.
Unilevers change programme, labelled Connected 4 Growth is apparently doing better than planned, and the company is now expecting an improvement in underlying operating margin this year of at least 100 basis points and strong cash flow.
Overvalued?
I could be talking about a hot growth stock here, rather than a purveyor ofsuch plodding brand necessities as Dove, Domestos, Knorr and Lipton, and a whole host of other well-known household names.
But thats part ofits strength. Financial crash? People will still needto wash. Housing collapse? Tea will still be taken.
Earlier this year, Unilever rejected a bid fromKraft Heinz at 4,000p per share, and that was a good move the shares currently trade at 4,365p. That gives us a forward P/E in excess of 20, which many think isovervalued. In fact, in the past Ive thought so, too. But when I look back on my former self and how well Unilever has done, I think plonker.
In my view, Unilever is possibly the best all-round, long-term share in existence.
Another Unilever?
When I look at Diageo (LSE: DGE), I cant help thinking that it is to booze what Unilever is to consumer goods. Diageo shares havent climbed quite as far as Unilevers just a relatively modest 1,100%! And recent dividend yields are slightly lower at just under 3%. But thats another cracking performance.
With spirits brands including Smirnoff,Johnnie Walker, Gordons, Captain Morgan, Seagrams and many more in its arsenal, Diageo was the worlds largest distiller until overtaken by ChinasKweichow Moutai earlier this year. It also owns many otheralcoholic beverage brands, including Guinness and Baileys, and it owns 34% of LVMHs Mot Hennessy.
What were looking at is very similardefensive safety to Unilever, in a product range that is very resilient against all sorts of economic and investment shocks, and with a similar global reach. In fact, North America accounts for 37% of total revenue, and its a growing market.
Diageo also provides steady earnings growth and at 2,300p, its shares command a premium P/E rating of around 20.
Not overvalued either
Again that looks high by usual metrics, but the falling pound is giving the firm a boost (with the majority of its revenue coming from overseas) and City analysts are predicting earnings per share gains of 18% this year and 8% next.
Once more I see a stock that should provide steady and safe returns for decades to come, with very little chance oflosing out in its key products and key markets. And I see the premium rating on the shares asjustified.
If you just bought these two shares, I reckon youd probably do better than a lot of investing professionals.
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