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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Unilever delivers solid results

The Spokesman-Review

Consumer products giant Unilever plc (NYSE: UL) reported a whopping 39 percent increase in earnings per share for its first quarter of 2008. It turns out, though, that a significant portion of the bottom-line improvement came from selling the Boursin Cheese business, along with an extension of a joint venture between its Lipton tea brand and PepsiCo.

Still, underlying sales were up 7.2 percent (adjusted for acquisitions, divestitures and currency effects). The company hiked prices by 4.8 percent, boosting the top line and helping offset commodity cost headwinds that continue to challenge competitors such as Kellogg and General Mills.

Despite the challenging cost environment, Unilever managed to grow operating margins, using a combination of price increases and some expense leverage.

Unilever is in the midst of a multiyear effort to become a faster growth engine with a focus on developing markets, expanding its personal-care business and creating a leaner operating structure. It’s not easy to change a 120-year-old company, but Unilever is making steady strides.

While its valuation seems a little high compared to some competitors, the company is delivering solid growth, along with a 2 percent dividend yield. And as long as the U.S. dollar remains weak compared to the euro, investors in Unilever could continue to benefit.

ASK THE FOOL

Q: What are “fixed-income” and “equity-income” mutual funds? – P.T., Vero Beach, Fla.

A: Fixed-income funds focus on bonds. Bonds are sometimes referred to as “fixed-income” investments because most bonds have a fixed interest rate, letting you know exactly what kind of income they will offer you.

Equity-income funds, meanwhile, focus on stocks that pay relatively high dividends, aiming to provide investors with regular streams of income. This is different from growth or value funds, which invest in companies whose stock is expected to advance, regardless of whether the companies even pay a dividend. Many fast-growing companies don’t pay any dividends, as they prefer to funnel most of their income into fueling their growth.

Mutual funds that focus on income are generally best suited to those who need regular distributions of cash, such as people in retirement. However, even retirees might remain invested in some other funds or stocks, simply selling off a portion each year to generate the income they need.

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