In spite of the more recent troubles PZ Cussons (LSE: PZC) has had in its emerging markets, I’ve retained my belief it remains a terrific pick for long-term investors.
In fact, in my most recent piece on the FTSE 250 firm, I tipped its share price to rise following trading results released last week and, hey presto, this is what indeed transpired. In it, the Imperial Leather manufacturer advised “full year profit expectations remain in line with the guidance issued at the time of the interim results in January,” news that would have prompted much fist-pumping from its investors.
Great news! You may be asking why such a brief statement would be the cause of celebration. Well, this latest update has to be seen in the context of the last couple of market releases which Cussons issued in December and then January, statements in which the business twice hacked back its full-year expectations because of challenging trading in Nigeria.
In the article linked above, I described how conditions in its critical African territory may finally be stabilising following many, many months of deterioration caused by rampant inflation. And today’s unspectacular update from Cussons suggests just that.
Should the household goods giant manage to repeat the trick and publish another reassuring update when next trading details are unpacked on June 13 then we could really see demand for the stock pick up. Particularly so if Cussons continues to be attractively valued (right now it deals on a forward P/E ratio of just 15.3 times for the fiscal year beginning in June).
City analysts certainly believe Cussons is about to put the extreme profits pain of recent years behind it and record earnings growth of 8% and 7% in the years to May 2020 and 2021, respectively. And consequently it’s expected to get dividends moving higher again too, predictions of another 8.28p per share reward for the year just ending anticipated to rise to 8.5p next year, and to 8.9p the following year. This means that yields sit at a fatty 4.3% for fiscal 2020, and 4.5% for the next period.
A FTSE 100 beauty Unilever (LON:ULVR) (LSE: ULVR) is another share with inflation-smashing dividend yields that’s impressed the market in recent days. In fact, this FTSE 100 company’s share price swelled to record peaks above £45 per share following a better-than-expected quarter one update released on Thursday.
In it the Marmite and Magnum manufacturer declared that underlying sales rose 3.1% in the three months to March, improving from 2.9% in the prior quarter, and underpinned by another strong performance in its developing markets where corresponding sales jumped 5%.
It’s this resilience in tough trading conditions which encouraged me to load my investment portfolio with Unilever, the strength of its product portfolio allowing it continue growing profits and dividends year after year. In fact, City analysts expect earnings to rise 7% and 10% in 2019 and 2020, respectively, figures that prompt predicted dividend increases to 144p per share for this year and 156.7p for next year, too. And these figures yield a healthy 3.2% and 3.5%.
I plan to hold my Unilever shares for many years to come, and I’m tempted to load up on PZ Cussons, too. Both companies boast brilliant product line-ups and excellent emerging market exposure, and I’m convinced this combination can deliver some tasty shareholder returns in the future.
Royston Wild owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK owns shares of PZ Cussons. 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.
Motley Fool UK 2019