Unilever shares are flying! Time to buy at a 21% ‘discount’?

Unilever shares have been racing higher this week after a one-two punch of news from the company. Here’s whether I think it’s time to consider buying.

| More on:

Image source: Unilever plc

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.

Unilever (LSE: ULVR) shares jumped 5% on Thursday making it one of the biggest FTSE 100 risers of the day. It capped off a great week for the company following first-quarter earnings. 

The rise followed remarks from the CEO about its ESG policies. He plans to reduce the focus on certain targets to provide better shareholder value. “I like realism,” he said.

Removing such restrictions will likely improve financials going forward. The markets seemed to agree with a 4.74% rise on the day.

I don’t own Unilever shares, so I’m looking at this as a chance to buy in. But I have to ask: is this a chance to buy in at the ground floor? Or is this simply white noise in the grander scheme of things?

I must say I’m pretty happy I haven’t owned Unilever shares of late. The stock has struggled since the pandemic. The current share price of £41.05 is 21% off its pre-Covid high of £51.96. 

Hold a candle

But I can’t ignore that Unilever has been one of the better UK shares this century. If I’d invested in 2006 then I’d be looking at a 514% total return. Per year, that’s a 10.6% return. Not many FTSE 100 stocks can hold a candle to that. 

A decent dividend supports it going forward. The current yield of 3.84% sizes up well with the rest of the FTSE 100 – an index known for generous passive income stocks – and it’s not in the firing line to get slashed either. 

I admire its products too. Is Hellmann’s Mayonnaise set to fall out of favour any time soon? Persil? Dove? Vaseline? I don’t think so. These are well-loved names and its to the credit of Unilever that it has built such a popular portfolio.

In terms of the latest news, I must say I’m encouraged by first-quarter results being positive. High inflation and the cost-of-living crisis are about as bad as it gets for the business it’s in, but these results bode well for the company and perhaps for the recovery as a whole. 

Not a seismic shift

In terms of the ESG news, this is a thornier one. The prospect of companies like Unilever being more conscious of its impact on the world sounds good, but any restrictions come at a cost. 

The silver lining might be that these ESG targets aren’t being binned, just made more realistic. Its target for reducing its ‘virgin plastic’ footprint by 50% by 2025 has shifted to 30% by 2026. The target for sustainably sourced crops has gone from 100% by 2030 to 95% by 2030. 

Do those sound like seismic shifts? Not to me. They sound more like tweaks that could instead be looked at as a company being pragmatic in what it can achieve. I’d say that’s a very good thing. 

With the firm trading at 19 times earnings – high for a Footsie firm – I don’t see this as an obvious add to my portfolio. But recent news seems positive and I’ll be keeping an eye on future developments.

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.

John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever Plc. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

What on earth’s going on with the Barclays share price?

The Barclays share price has skyrocketed in recent months, becoming one of the best-performing stocks on the FTSE 100 since…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Analysts say this amazing FTSE 100 stock is a takeover target!

This FTSE 100 stock's one of the worst-performing companies on the index in 2024. So why might other companies want…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

5.4% yield! 2 UK dividend shares to consider for a £1,080 passive income

I think these UK shares could provide a large and sustainable passive income. And they could be great buys today…

Read more »

Investing Articles

Here’s how investing £250 a month could bag me over £10K in passive income annually

This Fool breaks down how she would go about building a passive income stream worth over £10,000 annually to enjoy…

Read more »

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

I’d snap this FTSE 250 stock up in a heartbeat for juicy returns and growth!

Sumayya Mansoor explains why this FTSE 250 property stock is firmly on her radar as she looks to buy stocks…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

1 dirt-cheap FTSE 100 stock investors should consider buying in June

The FTSE 100 is littered with bargains, according to our writer. She explains why investors should be taking a closer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

The Legal & General share price has gone nowhere. Why?

The Legal & General share price has performed much worse than the the FTSE 100 over the past five years.…

Read more »

Investing Articles

Where will the BT share price go in the next 12 months? Here’s what the experts say

The BT share price has been sliding for years. But after the latest set of results, it looks like the…

Read more »