Relative calm mayhave returned to the markets, but looking at the bigger picture, little has changed. Volatility is still just around the corner. So it could be time to look at the way defensive stocks protected your portfolio last month and top them up. Two great companies are going ex-dividend on Thursday, so if youre making up your mind whether to buy into them, here are a few pointers.
Unilever (LSE: ULVR)has increased its dividend payout this quarter by 5% compared to a year agoand investors will receive 30 cents on 9 March.
Unilever is a great defensive play to add for the long term. The world might blow up, but people will always buy food, soap and shampoo. Its recent results really highlightthis because, despite falling inflation pressurising consumer product prices, the multinational executed effective strategies to grow its business markets that were showing signs of weakness.
Sales in emerging markets rose 7.1%, helping to take the sting out of a6% decline in pre-tax profits. Meanwhile, the brand loyalty campaigns Unilever mountedin the UK proved effective as a fightback againstfalling food prices.
Will currency weakness begin to hurt?
Risks for Unilever includethe continued deflationary trend globally and a weakening US dollar, becauseUnilever reports in euros but makes most of its sales in dollar areas. When the dollar is strong, this contributes significantly to the bottom line. But dollar strength is no longer a given, especially with the Fed indicating last week that it places greater emphasis on global factors before raising interest rates again. This means that when the yuan weakens, it can even drag down the dollar. Crazy, but true.
Unilevers 2.9% dividend yield might look feeble, but this also means the company is prudent in not over-promising and is making sure the cover is rock solid (1.9 times). With a P/E of 23 and the stock weathering the January sell-offs remarkably well by remaining flat, I believe this is still absolutely a great buy.
Weathering the storm
Imperial Tobacco Group (LSE: IMT)stock goes ex-dividend on Thursday 4February and the companypays a dividend of 0.49 per share on Thursday 31 March.
Imperial will soon be faced with a brand loyalty challenge as the UK government plans to ban graphics on the outside of cigarette packets. However, its unlikely to impact the worlds fourth-largest cigarette company much. Its going from strength to strength, mostly due to foreign sales. It realised a 15% rise to 1.76bn in pre-tax profitsfor the year to the end of September 2015.
Like Unilever, the US is a key market for Imperial. And as the British pound is less of a safe haven currently than the euro, it looks like Imperials future earnings are somewhat less prone to currency risks than Unilevers. A slump in emerging markets is also less of a threat to Imperial than Unilever as people will always smoke despite economic downturns.
Theres everything to like about Imperial. The company has committed to paying more regular dividend yields, and currently pays 3.74%. Its stock was impervious to Januarys market turbulence too, holding on to its 20% gains over the past 12 months. I would say, go buy it!
The UK stock market offers plenty of other excellent opportunities for long-term investors this year.
Take a look at our recently published report entitled A Top Growth Share, which deals in-depth with another UK growth company that has confounded value investors for years by consistently exceeding the growth priced into the shares.
Mark Rogers, one of our top investors, is convinced this particular company is barely scratching the surface of its international potential so click here to find out more.It’s completely free and there’s no further obligation.
Angelique van Engelen has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.