The Unilever share price: 5 reasons I’d buy the stock

Rupert Hargreaves explains the reasons why he why can’t wait to tap in to the Unilever share price when he has the chance.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Unilever (LSE: ULVR) share price is one of my favourite investments in the FTSE 100. Here are the five reasons I’d buy more of the stock today.

Household names

The company owns a portfolio of well-known brands, many of which are household names. Brands such as Marmite, Ben and Jerry’s and Radox. While these brands do face competition in their respective sectors, they are well established in the minds of consumers.

As such, I believe that if Unilever continues to invest in these products, they should remain household staples. This sort of brand recognition is an incredible competitive advantage for the group.

Large profit margins

The company’s strong profit margins have long supported the Unilever share price. Thanks to its portfolio of recognisable brands, which consumers are generally happy to pay more for, its profit margins are significant. For the past five years, the group’s profit margin has averaged 17.2%, that’s compared to the average of around 5% for all London-listed businesses. 

Unilever share price returns

Unilever’s fat profit margins allow the business to invest substantial sums in marketing and research and development. They also provide enough cash for significant shareholder returns. At the time of writing, the stock offers a dividend yield of 3.6%. Over the past five years, the company’s dividend has grown at a rate of around 7% per annum.

There’s no guarantee this trend will continue, but I think it shows the income potential of the Unilever share price. 

International diversification 

More than 50% of Unilever’s sales come from developing and emerging markets. The company has established subsidiaries in many markets, such as Unilever India, which is well known across its home market. This is another competitive advantage that has allowed the business to outperform other Western peers in these regions.

While having a local presence doesn’t always guarantee long-term success, it does indicate Unilever can respond faster to local trends. 

Pricing power

The combination of the company’s strong brand recognition among consumers and knowledge of local markets means it has incredible pricing power. Management can increase or decrease prices without having to worry too much about losing sales.

This has helped the business maintain its profit margins and should enable the corporation to increase prices if it faces threats such as rising input costs and inflation. 

Risks facing the Unilever share price 

These are probably the two most significant risks facing the Unilever share price right now. Rising inflation could erode the company’s profit margins, although its ability to increase prices may help the business deal with this headwind.

Higher labour costs could also reduce margins and increased costs. Then there’s competition to consider. Unilever is facing increasing competition from opportunist and more ethical brands. This opposition could weigh on growth in the medium to long term. 

Despite these challenges, I think the Unilever share price looks incredibly attractive today, based on all of the above. As such, I’d buy the stock for my portfolio.

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.

Rupert Hargreaves owns shares in 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.

More on Investing Articles

Bearded man writing on notepad in front of computer
Investing Articles

Could a 2025 penny share takeover boom herald big profits for investors?

When penny share owners get caught up in a takeover battle, what might happen? Christopher Ruane looks at some potential…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

3 value shares for investors to consider buying in 2025

Some value shares blew the roof off during 2024, so here are three promising candidates for investors to consider next…

Read more »

Investing Articles

Can this takeover news give Aviva shares the boost we’ve been waiting for?

Aviva shares barely move as news of the agreed takeover of Direct Line emerges. Shareholders might not see it as…

Read more »

Investing Articles

2 cheap FTSE 250 growth shares to consider in 2025!

These FTSE 250 shares have excellent long-term investment potential, says Royston Wild. Here's why he thinks they might also be…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Has the 2024 Scottish Mortgage share price rise gone under the radar?

The Scottish Mortgage share price rise has meant a good year for the trust so far, but not as good…

Read more »

Investing Articles

Will the easyJet share price hit £10 in 2025?

easyJet has been trading well with rising earnings, which reflects in the elevated share price, but there may be more…

Read more »

Investing Articles

2 FTSE shares I won’t touch with a bargepole in 2025

The FTSE 100 and the FTSE 250 have some quality stocks. But there are others that Stephen Wright thinks he…

Read more »

Dividend Shares

How investing £15 a day could yield £3.4k in annual passive income

Jon Smith flags up how by accumulating regular modest amounts and investing in dividend shares, an investor can build passive…

Read more »