Unilever (LSE: ULVR) is one of those stocks that I’ve always liked, but have never bought. That’s because it’s never offered the biggest dividend yield, and the Unilever share price has never looked like a screaming bargain.
But it’s kept plodding on, decade after decade, generating cash and rewarding its shareholders. It’s possibly the best FTSE 100 share I’ve never bought.
The share price has been flat over the past 12 months, and it’s down 8% in five years.
Progressive dividend
But despite a minor dip in 2019 due to Covid, the Unilever dividend has kept on creeping upwards. Right now, we’re looking at a forecast 2022 yield of 3.7%. That’s not massive. But it’s high by Unilever standards. And I’d much rather bag a long-term progressive dividend than a one-off sky-high one.
I’m not the only one who thinks the Unilever share price suggests a buy right now. It appears the company itself does too, considering it’s engaged in a big share buyback.
Turnover
Unilever’s third-quarter update reinforces what I see as long-term dependability. The company reported underlying sales growth of 10.6% in the period.
In total, turnover grew by 17.8% compared to the same quarter of 2021. And over the nine months, we see a 16.1% increase. We need to see that in terms of inflation, mind. It seems price growth rose to 12.5% in the quarter, while volumes dropped 1.6%.
I’d also like to see comparisons to 2019, the year before Covid-19 sent so much of our retail shopping into disarray. I’ll dig out the figures to compare — but I think it’s worth waiting for final results, to see the full impact of 2022 inflation.
Uncertainty
I do see Unilever as a long-term buy, but I think this all illustrates the short-term downside risk that investors face. We’re really only just into a hard inflationary year. And the impact that will have on consumer spending is still very uncertain.
As a dividend investor, I’ll be looking mostly at full-year cash flow. But right now, Unilever’s liquidity situation looks pretty good. The company announced a new €750m share buyback tranche in September, which should complete by December. In total, the board plans to return up to €3bn in buybacks by the end of the year.
The third quarter dividend is maintained too, at 42.68 euro cents per share (37p at current exchange rates). That’s bang on the dividend paid for the same period last year.
Verdict
To sum up, I think in times of tough economic conditions, it makes sense to invest in market and brand leaders. With so many of its consumer products, that’s exactly what Unilever is. They usually tend to hold up better against inflation and recession. But even the best should expect pain next year, I think.
So yes, I do think Unilever is a good defensive stock to buy for 2023 and beyond. Will I finally buy now? Probably not. That’s just because, once again during hard times, I see other FTSE 100 shares that I rate as more undervalued.
