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 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.
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*Based on aggregate data from The Motley Fool ShareDealing Service.
The article What You Were Buying Last Week: Unilever originally appeared on Fool.com.Jon Wallis doesn't own shares in any of the companies mentioned in this article. The Motley Fool recommends Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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