Unilever (LSE: ULVR) is one of those I always think should be tucked away in my portfolio somewhere. But I’ve never got round to buying. The trouble is, every time I’m ready for a purchase and I look at the Unilever share price, it suggests the stock is fully valued. I find what I think is a better bargain at the time, and buy that instead.
If there’s ever a stock worth buying on the dips, it’s surely Unilever. The trouble is, it rarely dips. But it has now. So here’s why I’m thinking that perhaps, maybe, it might finally be time for me to buy.
Unilever share price falling
Unilever shares have been dropping since the consumer products giant released first-half results on 22 July. While turnover edged ahead slightly, margins and profits declined a little. The firm’s operating margin fell by a percentage point to 18.8% on an underlying basis, with underlying EPS down 2%. EPS measured by GAAP standards dropped 5%.
The main culprit seems to be inflation, which is picking up a little. It’s raising the costs of Unilever’s inputs, and it always seems hard to pass on inflationary rises to consumers without something of a lag. Reckitt has been hit with the same problems, compounded with a fall-off in cleaning and disinfectant sales. And Reckitt shares fell harder than Unilever.
So where might the Unilever share price head in August and beyond? Fellow Motley Fool writer Andy Ross thinks it could continue to struggle in the months ahead. He makes some good points, and I think he could be right.
Extended buying opportunity?
If the price weakness does continue, it won’t bother me too much though. In fact, I’d welcome it, as it would give me more time to think about Unilever as an investment. That would be extra useful right now, because I reckon I’m seeing a lot of good buying opportunities out there and it’s tricky choosing between them.
Looking back a bit further into the Unilever share price history suggests a potentially even better buy. Unilever shares might have fallen in July. And they’re also down since their August 2019 peak well before the pandemic arrived. But if we go back as far as March 2017, we see price levels around the same as today’s.
So we’re looking at a quality stock, whose share price has essentially gone nowhere in more than four years. And in that time, with the exception of a small decline in 2020, EPS has continued to grow.
Dividend looking good?
The dividend has remained stable too. If the 2020 payment is repeated in the current year, it would provide a yield of 3.1% on the latest Unilever share price. For Unilever and its long tradition of progressive dividends, I find that attractive. On top of that, it’s a stock that’s attracted top investors who know a good long-term pick when they see one.
Unilever is on my shortlist for August and possibly beyond. My main problem is that the list is getting long, and I’ll need to cut it down quite a bit.