Friday, February 5, 2010

Unilever (UL) Dividend Stock Analysis

Unilever PLC, together with its subsidiaries, engages in the production and supply of fast moving consumer goods in food, home, and personal care product categories in Western Europe, the Americas, Asia, Africa, and Central and Eastern Europe. This international dividend achiever has raised dividends for over one decade.

This dividend stock pays dividends semi-annually. Another odd factor about it is the fact that it trades in the UK and the Netherlands. In this analysis I am concentrating on the British based, American Depositary Receipts. Unilever operates as a single business entity. However, there are two owners: Unilever (NV) and Unilever (PLC) are the two parent companies of the Unilever Group, having separate legal identities and separate stock exchange listings for their shares. You can find Unilever shares trading on NYSE as (UN) or (UL) representing NV and PLC respectively. (source)

The stock has delivered an average annual total return of 10.20% over the past decade.

Earnings per share have grown at an average pace of 12.10% per annum. Future growth in EPS would depend on how the company balances its pricing with the need for volume growth in its segments. For 2009, analysts expect the company to earn $2.01/share, which is lower than 2008’s EPS of $2.53. For 2010 analysts expect Unilever PLC to earn $2.21/share.

Annual dividends per share have increase by an average of 10.30% annually, which is lower than the growth in earnings. The reason why the dividend fluctuates is because it is typically translated from the British Pound to the US Dollar, and the exchange rate is fluctuating constantly. A 10% growth in dividends translates into the payment doubling every seven years.

The return on equity has fluctuated between a low of 13.50% in 2001 and a high of 58.40% in 2004. Over the past few years it has remained above 30%, which is impressive.

The dividend payout ratio has consistently remained above 50%, with the exception of 2000, 2001 and 2009.

Unilever (UL) currently trades at a P/E of 15.50 times 2009 earnings, has an adequately covered dividend, and yields 3.20. Overall Unilever (UL) does seem attractively valued at the moment.
I would definitely consider initiating a position in the stock when funds are available.

Full Disclosure: None

Relevant Articles:

- Best International Dividend Stocks
- Dividends versus Share Buybacks/Stock repurchases
- Dividend Aristocrats List for 2010
- Capital gains for dividend investors

5 comments:

  1. UL is switching from a semi-annual dividend structure to a quarterly structure.

    http://www.unilever.com/investorrelations/shareholder_info/dividends/

    ReplyDelete
  2. Thanks for the analysis. However from 2010 on, Unilever will be paying quarterly dividends.

    ReplyDelete
  3. Looks like the stock has taken a pretty big dip in the last week. This makes the dividend even more attractive.

    Based on support structures, its superb run-up might take the stock price down to 28 or 25 or worst case 20. 20 is unlikely but it all depends on whether we have a double dip recession or not!

    Thanks for the reco.

    Kenny

    ReplyDelete
  4. Dividend stocks is definitely the buzz word of 2010.

    ReplyDelete
  5. Hey guess what everyone?! UL will be paying out quarterly!

    ReplyDelete

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