The Unilever share price is falling but I’d still buy this top FTSE 100 stock

The Unilever share price has fallen after today’s full-year results but I think the market reaction has been overdone and I would buy it.

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The Unilever (LSE: ULVR) share price is down more than 5% today but I’m not too worried. In fact, I see that as an opportunity for me to possibly buy it at a reduced price.

I’ll declare my hand right now and say that the household goods giant is one of my favourite stocks on the entire FTSE 100. I think it offers a terrific combination of share price and dividend income growth, and offers protection against downturns too.

So whenever I see the Unilever share price trading at a discount, I get my greed on. But why are investors so fearful today? 

FTSE 100 household goodie

The obvious reason for the share price drop is that underlying operating profit for the year fell 5.8% to €9.4bn, with revenues down 2.4% to €50.7bn. That’s a blow, but is largely down to the pandemic as lockdowns hit sales, particularly in China and India. Some of the other numbers were more encouraging. Underlying profit rose 0.7%, at constant exchange rates. Underlying sales growth hit 3.5% in Q4. “Resilient” is the word chief executive Alan Jope used.

Better still, management increased its final dividend payout by 4%. Isn’t that what you want from a defensive blue-chip? A dividend increase, even in the worst of times? Half the FTSE 100 cut their shareholder payouts last year, but Unilever didn’t. Right now, it offers a forecast yield of 3.6%, which is pretty solid, especially when you compare it to the near-zero return on cash. It is covered 1.5 times by earnings.

The Unilever share price is usually rather expensive. I’ve got used to it trading at between 22 and 24 times earnings. Right now, it trades at 18.9 times forecast earnings, making it a relative bargain. 

The company has weathered the pandemic pretty well. Customers still need food and soap and household cleaning items, even during lockdown. I’d imagine the world needs Ben & Jerry’s more than ever, as we are stuck indoors in front of our screens. The shops that sell its products are the type of shops that are permitted to stay open, when others must close.

The Unilever share price is right for me

Another attraction is that Unilever gives investors access to the US and fast-growing emerging markets. Management is now looking to build on its strong positions in the US, India and China, which make up around 35% of its turnover.

So what are the downsides? Well, if vaccine success does signal the end of the pandemic, then companies operating in sectors that have been hit harder by the pandemic are likely to rebound faster. This means the share price could underperform in a recovery. It may also rack up costs meeting its sustainability commitments, as well as funding the shift towards e-commerce.

Management has completed the unification of its legal structure under a single parent company, but faces restructuring costs of around €1bn for 2021 and 2022. Maybe I’m too dewy eyed about this stock, but despite these challenges, I think the Unilever share price looks a possible buy for my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. 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.

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