The Unilever (LSE: ULVR) share price has recovered strongly since the stock market crash in March and is climbing again today after a positive set of third-quarter results. This confirms my view the household goods giant is one of the very best stocks on the FTSE 100.
Why do I like Unilever so much? Because it offers straightforward, everyday products that people want and need, such as soaps, shampoos, cleaning products, ice creams, teas and Marmite. The Unilever share price has reaped the rewards, growing 60% in the last five years. That compares to a drop of 10% across the FTSE 100.
Unilever’s vast range of established brand names gives it a defensive moat against competitors, who’ll have to spend big on marketing to catch up. Unilever boasts an incredible 13 brands in the Kantar Worldpanel Global Top 50, including Lifebuoy in third place, Sunsilk (10th), Knorr (11th), Dove (12th), Lux (13th) and Sunlight (14th).
I’d buy the Unilever share price
These products don’t cost much individually, which means people can still afford them in a recession. Unilever also enjoys massive diversification across markets, selling more than 400 brands in 190 countries to 2.5bn people.
From next month, Unilever aims to be fully incorporated in the UK, after choosing London over Rotterdam, simplifying its management structure. It’s currently the eighth biggest company on the FTSE 100, with a market-cap of £56bn.
Unilever’s share price is up around 1.5% this morning after it posted underlying sales growth of 4.4%, beating the group’s long-term goal of 2-4%. Emerging market grew fastest at 5.3%, a promising sign for the future. Developed markets grew 3.1%. This growth came despite a 2.4% drop in turnover, due to disposals and a 7.7% negative currency impact.
Today’s results could have been even better
CEO Alan Jope hailed a “strong performance,” adding: “Our focus remains volume-led competitive growth, delivering absolute profit and free cash flow.“
There’s another reason I like the Unilever share price. Management thinks of its shareholders. In April, Jope said it was standing by its dividend to support pensioners hit by cuts at other firms. Today, it maintained its quarterly dividend at €0.4104 per share. The forecast dividend yield is a steady 3.1%, covered 1.5 times.
The Unilever share price isn’t cheap, by conventional metrics. Before the pandemic, it routinely traded at around 24 times earnings. Today, it stands at just 20.4 times, which makes it a relative bargain. Its return on capital employed is 61.9%, by the way. Also impressive. Possible headwinds include legal challenges to its Dutch exit, plus the impact of Covid-19 on customers’ pockets.
Today’s results might have been even better but for a hefty currency impact. It seems the world has been spending lockdown buffing up their bodies and homes, while also filling up on Hellmann’s mayonnaise and Magnum ice cream.
The Unilever share price is cleaning up, rather like Reckitt Benckiser’s, and I’d expect that to continue far beyond the pandemic.