Over the last decade, the FTSE 100 hasn’t produced amazing returns for investors. For the 10-year period to the end of August, the index delivered a total return (gains plus dividends) of around 6% per year.
However, there are shares within the index that have performed far better than this. Here’s a look at a Footsie stock that has returned around 10% per year for investors over the last decade.
A reliable performer
The stock in focus today is consumer staples giant Unilever (LSE: ULVR). A nutrition, hygiene, and personal care company, it owns a lot of well-known brands including Dove, Domestos, Colman’s, and Persil.
Now, 10 years ago, Unilever shares were trading for around 2,620p. Today though, they’re changing hands for around 4,950p. That equates to a gain of about 89% or 6.6% on an annualised basis.
Add in the dividends the company has paid out however, and the returns here are much higher. Over the last decade, Unilever’s yield has generally hovered between 2.5% and 4%. If all dividends were reinvested over this period, investors would have been looking at total returns of around 10% per year.
That’s a decent return. Invest £10,000 and obtain a return of 10% per year and you’ll have almost £26,000 in a decade.
Two takeaways
If there’s one key takeaway for me here, it’s that we don’t necessarily have to invest in exciting companies to generate solid returns from the stock market. Let’s face it, Unilever is a pretty boring company. It literally makes soap, deodorant, clothes detergent, bathroom cleaner, and other mundane household products. But that hasn’t stopped the company generating great returns for investors. Because consumers tend to buy these products on a regular basis and Unilever can continually put its prices up due to its brand power.
Another takeaway, however, is that stocks with above-average valuations can still deliver great returns. Over the last decade, this stock has never really been cheap. Often, it’s had quite a high price-to-earnings (P/E) ratio (the P/E ratio today is about 20). But it has still outperformed the overall market by a wide margin.
The next growth driver
Can Unilever continue to deliver fantastic returns for long-term investors? I believe so.
Looking ahead, one key growth driver for the company could be India.
This country – which is home to a whopping 1.5bn people – is one of the world’s fastest-growing markets for consumer goods today due to the fact that wealth is rising and more people are entering the middle class. And Unilever has plenty of exposure to it through its subsidiary Hindustan Unilever.
India remains one of the world’s fastest-growing markets for consumer goods and by reaching more and more consumers in both urban and rural regions, we see enormous potential across the country.
Hindustan Unilever
I’ll be buying more shares
Now of course, there are no guarantees that Unilever shares will continue to perform well going forward. Looking ahead, the company will face intense competition from new, disruptive brands and could find some of its existing brands looking outdated.
I’m optimistic that the company has what it takes to fend off the competition and continue winning, however. I plan to continue buying the stock for my portfolio on dips.
The post This blue-chip FTSE 100 stock has returned 10% per year for the last decade appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Edward Sheldon has positions in Unilever. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
