As I wrote towards the end of May, the old FTSE 100 is dead. Four months on from the steepest crash in its history and the UK’s main market index keeps evolving.
The FTSE 100’s new king
Until recently, the surging share price of UK pharma giant AstraZeneca (LSE: AZN) had made it the FTSE 100’s new king. The shares are up a quarter (25.4%) over the past 12 months, driven by enthusiasm about an exciting drugs pipeline. The firm is also a leading candidate to develop a Covid-19 vaccine, briefly driving its share price above £100.
The FTSE 100’s new new king
AstraZeneca’s shares have dropped back about 15% from their all-time high and currently trade at around £86.56. This values the UK’s leading drugmaker at a tidy £113.1bn.
However, thanks to a recent share surge elsewhere, the FTSE 100 has yet another new king. Currently, the FTSE 100’s biggest business by market value is Anglo-Dutch household name Unilever (LSE: ULVR).
As I write, Unilever’s share price hovers around £47.14, valuing this global leader at £122bn – or £8.9bn more than AstraZeneca.
Unilever is built on enormous scale
Here’s a single number to blow you away. Around 2.5bn people – or one in three of the world population – use Unilever products. To me, that’s simply mind-blowing.
Unilever has had a long time to grow. Its origins date back to 1871, when it was built on making butter and margarine. It then moved into manufacturing soap, detergents, and a whole host of other household products.
Today, Unilever has over 400 household brands in its cupboard – far too many to list. In the UK, our favourites include Domestos (cleanser), Dove (soap), Hellmann’s (mayo), Knorr (soup), Lipton (tea), Lynx (deodorant), Magnum (ice cream), and Surf (laundry detergent) – and this list goes on and on.
A FTSE 100 colossus
While other businesses have crashed due to the coronavirus, Unilever’s market leadership in cleansing and hygiene products has proved vital. Last week, the FTSE 100’s #1 unveiled better-than-expected quarterly sales, down only 0.3% in the deepest recession in British history. This caused a one-day surge of nearly 8% in its share price.
At £47.14, Unilever shares are down just 3.8% over the past 12 months, while the wider FTSE 100 has crashed by a fifth. Unilever’s 52-week high of £53.33 was set on 4 September 2019, so it’s slipped 11.6% since. Then again, Unilever shares were an absolute bargain on 16 March, when they slumped to just £35.83. That was a golden opportunity to buy into a world-class business at a low price.
Unilever combines stability, income, and growth
Today, Unilever shares are not so cheap as in March, trading on a price-to-earnings ratio of 22.9 and a dividend yield of 3.1%. Then again, the king of the FTSE 100 keeps churning out quarterly cash dividends, unlike dozens of big firms that have cut, suspended, or cancelled payouts.
Buy Unilever shares before 6 August and you’ll be entitled to the next quarterly dividend of 36.98p, paid on 9 September. Then sit back and watch future dividends come rolling in forever. That’s why I’d buy and hold this FTSE 100 star’s shares today.
