Image source: Getty Images
The last five years have been pretty positive for the FTSE 100. Over this period, the UK’s main market index is up 54.9%, which is a compound annual return of 9.1% a year. However, this figure excludes cash dividends, which are particularly generous from some Footsie firms. However, one popular and widely held stock has been left behind in this surge, namely, Unilever (LSE: ULVR) shares.
Unilever unimpressive
For decades, Unilever stock was a great stock for fund managers and private investors to own. Year after year, the company would increase its sales, lift its dividend, and watch its share price follow suit.
However, the long-term growth of this powerful Anglo-Dutch business has ground to a halt since 2020/21’s Covid-19 crisis. Indeed, having overachieved for decades, the firm has mostly been an underperformer since late 2019.
As I write, the Unilever share price stands at 4,590p, valuing this global consumer-goods Goliath at £112.4bn. This puts the group fourth in the FTSE 100 rankings by market size. But they say that elephants can’t gallop — and Unilever shares certainly appear to be going nowhere.
Over six months, the share price is down 1.2%, while it has risen by just 1.4% over one year. Over five years, stagnation becomes clear, with the stock down 3.4% in half a decade. Hardly the stuff to spark joy, agreed?
Dividend dynamo
Then again, the above figures all exclude dividends, which are pretty generous from the maker of Dove soap, Magnum ice cream, and Persil laundry detergent. Based on the current share price, Unilever stock offers a cash yield of 3.4% a year — slightly above the FTSE 100‘s yearly yield of 3.1%.
Then again, the shares trade on a multiple of 23.4 times trailing earnings, producing an earnings yield of 4.3%. This mean that the current cash payout is covered below 1.3 times by historic earnings. Alas, this modest margin of safety might suggest limited scope for future dividend hikes.
We own Unilever
Disclosure: my family portfolio owns Unilever shares, having bought our holding for 4,081p a share in August 2023. Despite its downturn in global growth, I see this business as a hardy survivor. Founded in 1929, it then survived the huge US stock-market crash and the Great Depression of the 1930s.
In 2024, Unilever’s turnover was €60.8bn, spread across 190 countries. Amazingly, 3.4bn of the world’s 8bn people use its products every day, spread across five divisions: Beauty & Wellbeing, Personal Care, Home Care, Foods, and Ice Cream (currently up for sale). In short, this business is everywhere for everyone.
While I can’t say when Unilever shares will resume their long-term growth trend, I sleep easy owning such a long-established business. Sure, the next global recession might hit the firm’s revenues, margins, earnings, and cash flow, but people still need to wash, eat, and clean, right?
But surely there are more exciting stocks to buy out there?
