New to the stock market? I’d kickstart my investment journey with this Footsie stalwart

Investing in the market can be challenging. Here this Fool explores one FTSE 100 stock he’d be keen to buy if he was starting out.

| More on:
Young black colleagues high-fiving each other at work

Image source: Getty Images

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.

When just beginning, the stock market can seem incredibly confusing. Most of the time, it’s difficult to know where to start.

When I first started investing, I didn’t have much of an idea about what I was doing. I invested in companies without doing the proper due diligence. Unfortunately, it has meant that some of my earlier investments lost me money.

However, over time, as I’ve learned more about the stock market, I’ve found a strategy that suits me best. Now, I focus on buying high-quality businesses, predominantly on the FTSE 100 and FTSE 250, that I think will be able to provide me with healthy profits over years and decades. I also target companies where I clearly understand the business model and how revenue is generated.

If I were starting out again, here’s one stock I’d consider buying if I had some cash to invest.


The business in question is Unilever (LSE: ULVR). The stock has had a brilliant start to the year, rising 11.7%. That means it has outperformed the FTSE 100, which is up 6.7%.

When I look at investing in a company, there are a few things I make a beeline for. Firstly, how cheap are its shares? Unilever trades on 19.6 times earnings. Compared to the Footsie average of 11, that may look expensive.

However, that’s below Unilever’s historical average of 25. That means there could be value in its share price today.

Secondly, does it pay a dividend? Dividends are a form of profit sharing that companies use to reward shareholders. Unilever has a yield of 3.5%.

That’s nowhere near the highest available on the FTSE 100. Vodafone takes that crown with a 10.2% yield. However, there’s a reason I favour Unilever’s dividend over the likes of Vodafone’s.

It’s because the business hasn’t cut its payout for over 50 years. Dividends are never guaranteed. A business can reduce or cut its payout altogether without warning. We saw this during the pandemic.

Therefore, a track record like that gives me confidence that the business has put an emphasis on rewarding shareholders and will continue to do so moving forward.

The risks

Investing comes with risks and with Unilever, I see some challenges.

The largest is the fact that it faces stiff competition from budget retailers such as Aldi. Unilever sells premium products that often come at a premium cost.

As such, with many people struggling during the cost-of-living crisis, it may see them switch to more affordable alternatives. Aldi has been aggressively gaining a greater share of the market in recent years, which may be a testament to this.

Pricing power

That said, I still like the look of Unilever shares today. While it faces competition, it has proven recently that it has strong pricing power.

Last year, even though its prices jumped 6.8%, it still saw underlying sales grow 7%. That highlights that demand for its products is strong.

As such, Barclays recently raised its target price for the stock to 5,200p from 5,000p. That represents a 21.5% premium from its current price.

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.

Charlie Keough has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc, Unilever Plc, and Vodafone Group Public. 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

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »