One of the best “defensive growth” havens is consumer staples, and a particularly attractive stock in this sector is the diversified giant Unilever PLC (UL), suggests John Persinos, editorial director of Investing Daily.
With a market cap of $128 billion, Unilever offers healthy growth and income, and it’s a bargain to boot. European-based stocks present future investment opportunities, especially consumer staples companies with rosters of international brands.
The STOXX Europe 600 has been making a comeback in recent months, as investors expect the global economy, the European Union in particular, to begin recovering sometime in the first half of 2023.
Despite headwinds such as inflation and tightening interest rates, jobs growth and consumer spending have shown resilience in the U.S. and Europe. The Russia-Ukraine war is a drag on the Continent’s growth but major European democracies are weathering the energy crisis better than feared. Global inflation also is starting to peak.
With headquarters in London, Unilever wields a portfolio of ubiquitous household labels that are sold in more than 170 countries throughout Africa, Asia, Latin America, the Middle East, North America, and Western Europe.
The company’s stable of everyday items encompasses an enormous range of categories, including dressings and spreads, ice cream and beverages, personal care, and home care. The company straddles both the consumer staples and consumer discretionary sectors, with an emphasis on staples.
Unilever’s brands include blockbuster sellers such as Hellmann’s mayonnaise, Lipton tea, Knorr soups, Lux and Dove soaps, Ben & Jerry’s, Klondike, Slim Fast, Popsicle, Ragú, and Sure and Degree antiperspirants.
The company continues to push its iconic products into emerging markets, where increasingly affluent middle class consumers associate Unilever products with the good life in the West. Coveted brands and cost efficiencies, combined with steadfast consumer spending, put Unilever in a strong position for 2023.
This boom in the global middle class will translate into a huge increase in spending for basic consumer items that most North Americans and Europeans take for granted. Unilever is playing pied piper to this fledgling (and increasingly status conscious) middle class.
As of this writing on December 16, Unilever’s 12-month forward price-to-earnings ratio (FPER) stands at 17.5, which is a bargain compared to the FPER of 21.2 for the consumer staples sector, and the FPER of 19.3 for the S&P 500. Based on the analyst consensus, UL’s earnings per share over the next three years is projected to grow 26.25%.
Now sporting a hefty dividend yield of 3.50%, Unilever is appealing to income and growth investors alike. The company has weathered the pandemic and it’s positioned to thrive when current global headwinds dissipate.
