Unilever (LSE:ULVR) is a FTSE 100 company with many strings to its bow. By investing in Unilever shares, stockholders gain exposure to a diversified business that produces and sells a range of consumer goods covering beauty and wellbeing, personal care, home care, nutrition, and ice cream.
What’s more, it’s a Dividend Aristocrat. That means the firm has a long track record of consistent dividend growth, making it an attractive investment for passive income seekers. At present, the stock offers a 3.36% dividend yield.
So, how many shares would I need to buy to secure £1,000 in dividend payouts every year? Let’s crunch the numbers.
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Dividend investing
In its first-quarter results, Unilever confirmed it will maintain its quarterly interim dividend of €0.4268. That’s underpinned by robust free cash flow, which the company anticipates will total €6.5bn in 2023, combined with a net debt to underlying EBITDA ratio of 2.1 times — a figure in line with previous guidance.
As I write, the Unilever share price stands at £44.57. Accordingly, to target a £1,000 annual passive income haul, I’d need to buy 668 shares, which would cost me a grand total just shy of £29,773.
That’s an awful lot to invest in just one company and I don’t have that amount of spare cash to hand. However, it’s a useful indication of the kind of investment I’d need to make to target a four-figure dividend income every year.
Of course, dividends aren’t guaranteed. Companies can axe or suspend their shareholder distributions at any time. However, Unilever has a more impressive history than most FTSE 100 stocks in this regard.
Plus, the business is currently implementing a third €750m tranche of its ongoing €3bn share buyback programme, which suggests the near-term future remains bright.
Will the share price rise?
Beyond its dividend appeal, Unilever also offers the potential for share price appreciation. Over the past 12 months the stock has rallied nearly 22%. It has enjoyed a consistent upward trend since early 2022.
The company’s first quarter results suggest there’s every reason to believe this can continue. Unilever delivered sales growth across all five divisions. It exhibited particular strength in generating revenue from its family of 14 brands valued at over €1bn. Collectively, they account for 54% of its turnover.
Familiar names include toiletries label Dove, soup and stock cubes brand Knorr, and Magnum ice cream. But the group isn’t resting on its laurels. It injected an additional €500m into its marketing spend last year and further increases are expected in 2023.
Cost inflation remains a key concern. Although the company has successfully implemented price hikes in its products so far, there’s a limit to how far it can take this without suppressing demand. I’ll be keeping a keen eye on the firm’s trading volumes as the year progresses to see how Unilever is managing this challenge.
Should I buy?
Overall, I think the outlook for Unilever shares seems promising. A £1,000 annual dividend income from the company might be a distant prospect for me at present, but I can see plenty of compelling reasons to invest in the shares as part of my diversified dividend portfolio.
If I had some spare cash, I’d buy this stock today.
