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I Unilever (LSE: ULVR) share price is back and the stock is doing what it does best – powering up in any weather.
Unilever shares rose for one week, one month, three months, six months and one year. They grew a total of 24.53% during that time. A brilliant turn after a difficult spell. To show just how bad it has been, shares are down 1% in five years.
This suggests to me that it is not too late to participate in Unilever's recovery by buying its shares. Or in my case, buying more of them.
Can the recovery continue?
I like to pick unpopular stocks, where the underlying business is strong if management can't hold on. That's how I looked at Unilever, and things turned out the way I wanted. I wish it could stay like this.
The consumer goods specialist has threatened to collapse under its own weight after an unfocused, widespread frenzy that has lost focus on what matters. It has found itself under new CEO Hein Schumacher but still has a lot of work to do.
I bought the shares on 7 June last year for 4,000p. Today, they trade at just over 5,000p, and I have a year's worth of shares too. I added my share in May and June this year, as my hope for her recovery grew. Now I'm thinking of buying more.
Results for the full year 2023, published on 19 January, showed sales growth of 7%, rising to 8.6% thanks to 30 'power products'.
A conversion rate of 111% and free cash flow of €7.1bn, up €1.9bn on the previous year, are also impressive. Unilever has rewarded loyal investors with a €1.5bn new shareholder buyback and has started 2024 on a positive note. Underlying sales rose 4.1% while operating margins increased 250 basis points to 19.6%.
FTSE 100 dividend growth stocks
Life goes through cycles, and so do businesses. I think Unilever still has to go but there are threats. The US is flirting with recession. China is in an old mess. A global recession can eat into sales, volumes, cash flow and dividends.
Unilever shares are not as cheap as they used to be. I bought mine at a P/E of 18 times earnings. Today, that's up to 22.93. So there is little room for maneuver. And I worry that Schumacher is yet to give the company the real shakeup it needs. I'm also afraid that some of its food brands look like old hat. Bovril, Cornetto, Hellmann's, Knorr, Pot Noodle again Vienna they are not healthy and they are not cutting edge.
With a market cap of around £125bn, Unilever is the third largest stock FTSE 100after AstraZeneca again A shell. If it rose another 25%, that would push it past the £150bn mark.
The air is starting to thin a little at the top. I wish it would give a higher yield than 2.97%. Worryingly, growth in the budget share has slowed, as this chart shows.
Chart with TradingView
Which brings me to the technical problem. On the 6th of September, I received a dividend of £40. For shares at £50, I do not benefit from automatic dividend reinvestment. So I need to put my hand in. In fact, I can't think of a better FTSE 100 stock to buy right now than Unilever. That's what I'm going to do.
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