Shares in Unilever (LSE:ULVR) have fared better than the FTSE 100 since the start of the year. Unilever shares have fallen by 0.5%, compared to a 3% decline for the broader index.
It isn’t hard to see why. Demand for Unilever’s products tends to be steady and this helps the share price hold up in difficult economic conditions.
On the other hand, the Unilever share price doesn’t tend to produce spectacular results in more favourable conditions. Most of the return comes from the dividend that the company pays to its shareholders.
The UK seems to be on the edge of a recession. So it seems to me like a good time to wonder how much money I’d have made if I’d bought Unilever shares a year ago.
Unilever shares
Over the last year, the Unilever share price has increased by 0.89%. That’s not a lot, especially compared to the 3.79% the FTSE 100 has increased by.
That means that if I’d invested £1,500 in Unilever shares a year ago, I’d be able to sell my investment today for just over £1,513. By itself, that’s not a spectacular return. Most of the return on the stock comes from the dividend the company pays, though. Adding that in makes the return a bit more attractive.
A year ago, Unilever shares traded at £39.46 per share. So my £1,500 investment would have bought me 38 shares. Since then, the company has paid out just over £1.44 per share in dividends. With 38 shares, I’d have received just under £55 in dividends.
Of course, I could have reinvested my dividends to increase my ownership in the business. But even without this, I’d have secured a return of around 4.5%.
Is a 4.5% return any good? In my view, that depends on what else is available.
UK stocks
Returns from other UK stocks have been mixed over the last year. Some have done better than Unilever, others have done much worse.
Shares in Diageo, for example, are up almost 9% over the past 12 months. The Diageo share price has increased from £34.67 to £37.78.
That means a £1,500 investment in Diageo shares a year ago would be worth £1,633 today. Add in another £32 in dividends and the return comfortably beats the return on Unilever shares.
By contrast, Tesco shares have done much worse since last September. The share price has fallen by 9.62% from £2.57 to £2.32.
Investing £1,500 in the company’s stock a year ago would have generated around £58 in dividend income. But the overall investment would still only be worth £1,413.49.
A stock to buy?
Overall, Unilever shares do seem to offer some decent protection from economic downturns. The stock has fared well recently, compared to the broader index.
I think that the time to be greedy with Unilever shares, though, is when others are fearful. Right now, investors are running for cover in Unilever shares, which means I’m looking for opportunities elsewhere.