The share price of FTSE 100 company Unilever (LSE: ULVR) fell to a 12-month low of 4,170p on 28 February. As with the rest of the index, the household goods manufacturer’s equity had been weighed down by coronavirus fears.
However, its share price is beginning to rise. And fast.
Eligibility for subsidised loans
This could be due in part to Unilever’s Chinese subsidiary being eligible for a subsidised loan from the Chinese Government. The aim of the loan is to ensure financial support for key companies helping to prevent and fight the coronavirus epidemic.
There is no sign that Unilever will request the loan, or that it needs to. But it is a comfort blanket for investors, knowing that the Chinese Government recognises the importance of the company for the Chinese economy.
It’s in these uncertain times that finding investments that will likely blossom in the long term becomes more important. Unilever could be such an investment.
A forever stock
Described as a forever stock by some analysts, Unilever has a history of high margins and returns throughout the economic cycle, and is a favourite stock of many equity fund managers.
Producing a large variety of goods, and with sector leadership positions in many, Unilever has a competitive advantage over many of its peers. Unless we stop washing, eating ice-cream and changing many other habits, the manufacturer of Dove soap, Wall’s ice-cream and Lynx deodorant should continue to serve the needs of its customers.
In these times of environmental awareness, the firm is actively attempting to reduce its environmental impact and is building resilience into its supply chains. Its work into sustainable palm oil production is one example of Unilever’s longevity planning. I believe that these types of investments are now so necessary for companies to survive the decarbonisation revolution happening all around us.
If all this isn’t tempting enough, Unilever is a regular top FTSE dividend yield payer and currently yields 3.1%, growing its dividends by 6.3% last year. The company exhibits a sound balance sheet and manageable debt levels. This reduces the risk of having to use cash for paying off debt that could be better paying the dividend or other value-adding investments.
Indeed, the consumer goods firm has made it onto investment manager Evenlode’s 2020 global sustainable dividend list, and has performed very strongly over the last 20 years.
A company such as Unilever, that can grow its dividend year-on-year, can help protect against inflation or provide a capital boost if reinvested. This makes such investments highly sought after.
The consensus among analysts is that Unilever stock has a fair value of around 4,700p. At the time of writing, Unilever’s share price is 4,326p and rising.
Unilever is a quality stock going cheap. It is undervalued and now could be a good time to buy it.
Rachael FitzGerald-Finch has no position in Unilever. The Motley Fool UK owns shares of and 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.