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British multinational consumer goods company Unilever (LSE: ULVR) is one of those astonishingly rare stocks that has offered shareholders excellent share growth along with a regular and sizable dividend.
Not surprisingly, the company has achieved a valuation of £102 billion, making it the fourth largest on the London Stock Exchange.
Should I pick up some shares myself? Well, I think one of Unilever’s strengths is being a safe but lucrative investment during a downturn thanks to its wide range of strong brands like Pigeon, Hellmann’s and Magnum.
The last year has been tough for the markets, so let’s see how a £1,000 stake in this company would have performed.
How much would £1,000 be worth now?
Unilever’s share price was £39.46 at the start of 2022 and has risen to £40.86 at the time of writing. A modest 3.5% increase in stock price alone then. Not bad, but I also have to take into account the dividend.
Dividends since early 2022 have been quarterly payments of 36.02p, 35.9p, 36.33p, 37.22p and 38.12p. The latter is about to be paid for in a few days, on March 21, but I’ll include it just in case. Now the share price has risen to £42.70, an increase of 8.2%.
My £1,000 worth of Unilever shares would be worth £1,082. That’s a good return for just over a year, but during a stock market correction and cost-of-living crisis? I would be very happy with that.
Oh, and the actual return would be a bit higher if you had reinvested those dividends directly into more shares.
So is this evidence enough for me to go all-in with the consumer goods company? Definitely not, and here’s why.
Two things to keep in mind
A calculation like the one above can be useful in helping me choose stocks to invest in. After all, the stocks that offer the highest returns are the ones I want in my investment account. That way, I can share the success of a company. But there are two dangerous problems with blindly looking at a stock’s past performance.
First of all, if I want to open a position on a stock, past performance is just one piece of the puzzle. I want to own shares in a good company that thrives. For this, research is absolutely crucial.
In the case of Unilever, an important detail is the firm’s strong brand power. the people buy Magnum because they like the brand, not because they want the cheapest ice cream they can get. This is good for an inflationary environment like we have today, as increased costs can be passed on to customers.
The second problem is that stocks and the markets in which they trade are unpredictable. Even good companies can have a bad year or two.
A good long-term wealth building strategy is to invest in a few carefully selected companies. This will smooth out the ups and downs of any individual stock.
In this case? I like Unilever in general and I can see that the future will be as successful as the past. As it is, I will be looking into the possibility of opening a position with the company in the near future.
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