What You Were Buying Last Week: Unilever

LONDON -- One of Warren Buffett's famous investing sayings is "Be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying and buy when they're selling.

But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.

So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so and what might have made them decide to do so.

A stereotypical blue chip
Unilever  (LSE: ULVR  ) (NYSE: UL  ) is a stereotypical blue-chip company -- it has an international reputation for quality and reliability, and has proved its ability to operate profitably, despite the vicissitudes of the stock market, to deliver rewards to its shareholders over the long term.

Unilever sells brands that everyone knows and that command consumer confidence and loyalty. It counts Marmite, PG Tips, Persil, Walls, Cif, Flora, Knorr, and Colman's in its stable of more than 400 brand names worldwide. There's even Pot Noodle, a brand many people claim to hate, although the fact that it holds a 49% value share of the "instant hot snack" market suggests otherwise.

Of course, companies like Unilever tend to command a premium price for their shares -- quality rarely comes at a discount price -- and Unilever is currently on a P/E of almost 18, somewhat above the FTSE 100 average. So perhaps the recent dip in the stock market has provided an opportunity to buy into the company at a slightly less expensive price (I won't say "bargain" because it's not). Some investors may well have thought so, as Unilever was in the No. 8 spot in the latest "Top 10 Buys" list*.

If their investment is to pay off, Unilever needs to keep delivering growth. Thankfully, that's exactly what analysts expect it to do, at least in the medium term -- earnings per share are forecast to grow at around 13% this year and more than 10% next year. And Unilever's enviable exposure to emerging markets, with their greater growth potential than established ones, should stand it in good stead for some time to come.

Better still for investors, Unilever is committed to its dividend -- since 2010, its dividend policy has been "to seek to pay an attractive, sustainable and growing dividend to shareholders," which is exactly what it's been doing, increasing its yield well ahead of inflation. And as its dividend has been comfortably covered by its free cash flow, there's reassurance that it's sustainable. Unilever's dividend is currently at around 3.6% -- just above the FTSE 100 average -- and is forecast to rise to 3.9% in 2014.

But, of course, no matter what other people were doing last week, only you can decide if Unilever really is a "buy" right now.

Five top tips
If you're looking for some high-quality investment opportunities, you should definitely read the latest free Motley Fool report, "5 Shares to Retire On."

This exclusive report features five top-quality shares -- companies that have an outstanding record of providing reliable shareholder returns -- selected by our team of expert analysts here at The Motley Fool.

Get your free copy now.

*Based on aggregate data from The Motley Fool ShareDealing Service.

link


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2509661, ~/Articles/ArticleHandler.aspx, 10/23/2014 3:01:59 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement