The Unilever share price: 5 reasons I’d buy the stock

Rupert Hargreaves explains the reasons why he why can’t wait to tap in to the Unilever share price when he has the chance.

| 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.

University graduate student diploma piggy bank

Image source: Getty Images

The Unilever (LSE: ULVR) share price is one of my favourite investments in the FTSE 100. Here are the five reasons I’d buy more of the stock today.

Household names

The company owns a portfolio of well-known brands, many of which are household names. Brands such as Marmite, Ben and Jerry’s and Radox. While these brands do face competition in their respective sectors, they are well established in the minds of consumers.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

As such, I believe that if Unilever continues to invest in these products, they should remain household staples. This sort of brand recognition is an incredible competitive advantage for the group.

Large profit margins

The company’s strong profit margins have long supported the Unilever share price. Thanks to its portfolio of recognisable brands, which consumers are generally happy to pay more for, its profit margins are significant. For the past five years, the group’s profit margin has averaged 17.2%, that’s compared to the average of around 5% for all London-listed businesses. 

Unilever share price returns

Unilever’s fat profit margins allow the business to invest substantial sums in marketing and research and development. They also provide enough cash for significant shareholder returns. At the time of writing, the stock offers a dividend yield of 3.6%. Over the past five years, the company’s dividend has grown at a rate of around 7% per annum.

There’s no guarantee this trend will continue, but I think it shows the income potential of the Unilever share price. 

International diversification 

More than 50% of Unilever’s sales come from developing and emerging markets. The company has established subsidiaries in many markets, such as Unilever India, which is well known across its home market. This is another competitive advantage that has allowed the business to outperform other Western peers in these regions.

While having a local presence doesn’t always guarantee long-term success, it does indicate Unilever can respond faster to local trends. 

Pricing power

The combination of the company’s strong brand recognition among consumers and knowledge of local markets means it has incredible pricing power. Management can increase or decrease prices without having to worry too much about losing sales.

This has helped the business maintain its profit margins and should enable the corporation to increase prices if it faces threats such as rising input costs and inflation. 

Risks facing the Unilever share price 

These are probably the two most significant risks facing the Unilever share price right now. Rising inflation could erode the company’s profit margins, although its ability to increase prices may help the business deal with this headwind.

Higher labour costs could also reduce margins and increased costs. Then there’s competition to consider. Unilever is facing increasing competition from opportunist and more ethical brands. This opposition could weigh on growth in the medium to long term. 

Despite these challenges, I think the Unilever share price looks incredibly attractive today, based on all of the above. As such, I’d buy the stock for my portfolio.

More on Investing Articles

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

Why a bear market is an investor’s best friend

A bear market can certainly be scary. But any investor tempted to sell might benefit by looking at Warren Buffett's…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price could be stuck below £1 for a while. Should I buy?

The Rolls-Royce share price has been trading at penny stock levels since April. Could the stock be a bargain at…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m aiming to make £45,000 in passive income with UK shares and never work again!

Investing regularly in UK shares can generate a substantial passive income over the long run. Zaven Boyrazian demonstrates how.

Read more »

Portrait of construction engineers working on building site together
Investing Articles

Down 30%, are CRH shares a screaming buy?

The CRH share price has slumped this year. Roland Head asks if this overlooked FTSE 100 share could be a…

Read more »