With £500 I’d choose this as the best share to buy in October

Harvey Jones is wondering which would be the best share to buy in October, if he only had a small sum to invest. This FTSE 100 dividend growth stock looks ideal.

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There’s no right or wrong answer to the question which is the best share to buy at any given point. It depends on what’s happening in the market, but crucially, it also depends on the investor. 

For example, I think October would be a pretty good time to buy FTSE 100 insurer Aviva, but one thing is stopping me. I already have a big stake in rival Legal & General Group so I’d risk being over-exposed to the fortunes of just one sector.

Loads of other factors come to play, including how experienced I am, and how much money I have to invest.

Should you invest £1,000 in HSBC right now?

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My debut stock pick

For example, if I was buying my first ever individual stock, I wouldn’t start with luxury car maker Aston Martin Holdings. Its shares are volatile and I only bought them myself after first building a balanced portfolio of 24 more sensible stocks.

If I was starting from scratch, and only had £500, I’d want something whose shares were unlikely to go haywire and put me off investing for good.

With that in mind, I’d go for a solid FTSE 100 blue chip and one named jumped right out at me: consumer goods giant Unilever (LSE: ULVR). This is no ‘here today, gone tomorrow’ enterprise. It was founded in 1929. While there’s no guarantee it will survive another century, it’s record does give me a degree of comfort.

Unilever is a massive global enterprise that boasts top brands Axe, Ben & Jerry’s, Bovril, Dove, · Domestos, Magnum, Sunsilk, Vaseline, and many more. An estimated 2.5bn consumers use them every single day.

Unilever is where I’d begin

It doesn’t sell expensive, luxury purchases but everyday basics with high brand recognition and loyalty. This helps protect sales in a recession, when people are cutting back, while generating plenty of extra revenues in the good times.

Yet Unilever got itself in a bit of a mess in recent years. It became too big and sprawling. Activist investors started sniffing around, pushing to break up the company. Sales dipped as customers felt the pinch. Fortunes ebb and flow even at the biggest and best companies.

Unilever is steadily picking itself up. Over 12 months, its shares are up 19.76%. Throw in a trailing dividend yield of 3.03%, and the total of return is 22.79%. It’s always worth pointing out that returns aren’t guaranteed. I’ve no idea where it will go next year, but over the longer run, I’m optimistic that it can outpace the FTSE 100, and with less volatility along the way.

Created with Highcharts 11.4.3Unilever PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Unilever’s shares trade at 22.46 times earnings today. That’s comfortably above the FTSE 100 average of 15.7 times. It’s a premium price for a premium company. But a great way to get started with £500.

There’s one downside of investing a small sum in this stock. Today, each share costs 48.93p. That means my reinvested dividends wouldn’t be big enough to automatically buy more shares. So I’d look to build my stake over time. That £500 is just the start.

Should you buy HSBC shares today?

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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.

Harvey Jones has positions in Aston Martin, Legal & General Group Plc, and Unilever. The Motley Fool UK has recommended Unilever. 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.

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