As a long-term value/income/dividend investor, my goal is to build well-diversified portfolios to generate extra passive income for my family. Ideally, I look to invest in solid, established, well-run businesses with decent future prospects. So why on earth haven’t I bought Unilever (LSE: ULVR) shares yet?
A great British/Dutch success story
I’m almost scratching my head in puzzlement as I try to figure out why Unilever stock isn’t already a member of my latest portfolio. This pot includes seven other FTSE 100 shares, three FTSE 250 shares, and seven US stocks. But why not Unilever stock?
The first point I’d make is that I’d very much like to become part-owner of this great Anglo-Dutch company. The group’s origins date back to the 1860s, so it has a storied history.
Second, thanks to a cupboard packed with leading brands, this company has grown to become a £104.9bn consumer-goods giant — the fourth-largest firm in the FTSE 100.
Third, Unilever’s share price has weakened this month. On Friday, it closed at 4,169p, 7% below its 52-week high of 4,483.25p, reached on 28 April.
Over one year, this popular stock has leapt by almost a fifth (+19.5%). However, over five years, it has hardly budged, falling just 0.01%. These returns exclude cash dividends, which are a big draw for Unilever shareholders.
I like Unilever stock
I love this business and am keen to join its shareholder register. So what’s stopped me from becoming a Unilever stockholder to date?
To be honest, I think that I see this group as ‘boring but reliable’, leading me to seek out more exciting shares to buy. But history has taught me that sometimes even the most boring stocks can produce outstanding returns.
When I look at Unilever today, I see a great business whose shares trade at a modest premium to the wider Footsie. Based on a price-to-earnings ratio under 16.1, this stock has an earnings yield of 6.2% a year. Not bad, but not wildly cheap.
Also, I’m drawn to the dividend yield, which currently stands at 3.6% a year — a whisker short of the FTSE 100’s yearly cash yield of 3.7%, However, Unilever has a great history of raising this cash payout over decades.
How I wish I had bought Unilever shares at their 52-week low of 3,469.5p on 27 May 2022, exactly a year ago. But time travel isn’t an option for me, alas.
Therefore, I’m going to follow the wise words of my investing hero, Warren Buffett. The Oracle of Omaha tells investors: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
In short, soon after my wife and I receive a cash windfall in July, we will buy Unilever stock for our family portfolio. And that’s despite my worries about rising interest rates, soaring consumer prices, and weaker growth hitting disposable incomes, consumer spending, and UK company earnings!
