For many investors, safety has been the keyword for 2020, and many flocked to the usual haven of gold. But here’s the thing that strikes me — investing for safety works best before things go wrong, not after the catastrophe has hit. On that score, I rate Unilever (LSE: ULVR) as one of the safest long-term investments ever. The Unilever share price looks set to end 2020 around 2% up, which is certainly better than the FTSE 100‘s 12% fall. But that’s just the start of the Unilever story.
Over the past five years, the Unilever share price has risen by 50%. Over the same timescale, the FTSE 100 has managed a gain of just 5.5%. Admittedly, that Footsie performance does include the Covid-19 crash. But even before the virus scourge hit the planet, Unilever shares were already well ahead of the index.
What about 10 years? The FTSE 100 has suffered a pretty bad decade, with Brexit not exactly helping UK shares. The overall gain of 10% is poor compared to the index’s history. We have, though, had dividends averaging around 4% per year to help compensate. But it still doesn’t come close to the 125% climb we’ve seen from the Unilever share price in the same 10 years. Oh, and Unilever has been paying healthy dividends too. So that’s a hands-down win for Unilever over a decade.
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Unilever share price over 20 years
But what if we look back further, say 20 years, and see how the whole century has gone so far? Well, the poor old Footsie has grown by a rather feeble-looking 6.5%. It has, of course, had to cope with an oil price crash and the UK banking crisis. Oh, and another oil price crash. The Unilever share price, by contrast, is up 250% so far this century (with all those lovely dividends to add on top).
I’m really not surprised that Unilever investors have done do well. Unilever offers a whole host of essential food, cleaning, home and personal hygiene brands. The company’s reach is truly global too, with hardly a country missing out on its brands. North Korea might not have any, I guess. In fact, I often think about how it’s probably almost impossible to do a week’s shopping without buying any Unilever brands. And I’m saying that with some toast and Marmite next to my keyboard — yes, in case you didn’t know, Marmite is one of Unilever’s.
Worth a high valuation?
With that amazing track record, the shares must be on a high valuation, mustn’t they? Well, yes. On the current Unilever share price, we’re looking at P/E multiples of around 20. That’s a fair bit higher than the FTSE 100’s long-term average of about 14. Some investors might hesitate at that for a company that just sells ordinary, everyday stuff.
But Unilever shares have commanded that kind of valuation for as long as I can remember. It comes from having an unassailable market advantage, providing a safe investment, and generating vast amounts of cash to hand over in dividends.
I’ve no idea if the Unilever share price will beat the FTSE 100 in 2021. It might very well not if there’s a general recovery. But I’d buy Unilever and hold for the next 10 or 20 years.
