As the Unilever share price continues to fall, I’m still buying the stock

The Unilever share price has trended lower this year, but this could be an opportunity to buy, considering its yield and defensive nature.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The Unilever (LSE: ULVR) share price has been a challenging investment to hold over the past 12 months. The stock is off 15%, excluding dividends, since the middle of February last year.

Unfortunately, declines in the shares have only accelerated over the past few weeks. Since the beginning of the year, the stock is off around 11%, excluding dividends paid to investors. 

However, despite this performance, I’ve been adding to my position in the consumer goods giant. 

Mixed outlook

Investors seem to have been selling their shares in the company over the past year due to concerns about Unilever’s growth potential. The firm relied heavily on business-to-business trade before the pandemic. That meant when the world went into lockdown in the first half of last year sales suffered. 

Over the past year, management has been repositioning the company for the new normal. The strategy seems to have yielded results as management was able to reinstate the group’s long-term growth target earlier this year. It’s aiming for sales growth of 3-5% per annum in the long term. But this outlook has only had a limited impact on the Unilever share price. 

Of course, the corporation is by no means guaranteed to hit these targets. As we’ve seen over the past year, outside events can impact even the market’s largest and most defensive businesses. Other factors have also hurt the company’s growth. Labour disputes, rising costs and currency headwinds are all issues Unilever’s management has to deal with regularly. 

On the other hand, the company does have a diversified portfolio of products, supplying everything from Ben & Jerry’s ice cream to Brylcreem, Bovril and Cif. This level of diversification has helped the business weather the pandemic. It’s fared much better than many other FTSE 100 corporations as a result. 

The Unilever share price: a long-term investment

Unilever’s growth targets suggest the company won’t become the market’s fastest-growing enterprise anytime soon. Nevertheless, it does imply the business is aiming for slow and steady long-term growth from its portfolio of billion-dollar brands.

That’s why I like the group. It’s not going to shoot the lights out, but I think it’s more dependable than many other businesses, thanks to product diversification. 

What’s more, after recent declines, the Unilever share price currently supports a dividend yield of just under 4%. This distribution isn’t guaranteed forever. If the company’s earnings suddenly take a dive, for example, management may have to cut the payout to reduce cash burn.

However, Unilever seems to be committed to the dividend for the next year at least. That’s highly positive, in my view. 

So, overall, considering the company’s defence nature and attractive dividend yield, I’d buy the stock for my portfolio today. Still, this organisation may not be suitable for all investors, considering its modest growth targets and potential headwinds. 

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.

Rupert Hargreaves owns shares 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.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today!

Our writer explains how money invested in Nvidia stock less than three years ago has grown in value over tenfold…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
US Stock

3 red flags I’m seeing right now for the S&P 500

Jon Smith points out some concerns he has with the S&P 500 at current levels and picks one stock he's…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

UK dividend shares are outperforming US tech stocks!

UK dividend shares aren’t just for passive income investors. Over the last 12 months, they’ve been outperforming their US tech…

Read more »

DIVIDEND YIELD text written on a notebook with chart
US Stock

Here’s how much passive income an investor could make with £2k in Meta stock

Jon Smith looks at Meta stock from a different angle to normal, considering it as an option for an investor's…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

1 of my top UK shares is up 15% in a day! Is it still a buy for me?

Celebrus shares are soaring after strong full-year results. At a P/E ratio below 13, is it one of the best…

Read more »

Close-up of children holding a planet at the beach
Investing Articles

£10,000 invested in Jet2 shares 2 years ago is now worth…

Jet2 shares have surged in recent months and finally appear to be pushing towards fair value. Dr James Fox shares…

Read more »

piggy bank, searching with binoculars
Investing Articles

This FTSE 100 blue-chip could rise 26% in 12 months, according to brokers

While this FTSE 100 dividend stock has put investors through the wringer in recent years, some analysts see brighter skies…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

A 3-step passive income strategy to target major wealth

Want to invest in the stock market to build up a passive income stream? There's no fiendlishly complex multi-step mystique…

Read more »