London-based Unilever PLC (UL - Get Rating) is one of the world’s leading suppliers of beauty and personal care, home care, and food & refreshment goods, with sales in more than 190 countries and products used by 2.5 billion people every day. The company reported 2.5% underlying sales growth for the third quarter, ended September 30, 2021. In addition, its turnover increased 4%, including 1.6% from acquisitions, net of disposals. The stock has gained 1.6% in price over the past month.

UL’s $2.03 trailing-12-months annual dividend payout translates to a 3.79% yield, versus the 2.14% industry average. This compares to its 3.23% four-year average dividend yield. Its dividend payouts have grown at a 7.7% CAGR over the past five years.

The company’s operational excellence continues to drive its growth. In addition, its strong top-line growth, driven by improvements across all business segments, should further boost the company’s overall performance.

Here is what could shape UL’s performance in the near term:

Positive Developments

In August, Unilever launched its Positive Beauty Growth Platform, an initiative designed to collaborate with scale-ups and startups to drive innovation and brand growth. Unilever’s Beauty & Personal Care Division, which includes global brands Dove, AXE, and Love Beauty & Planet, and The Unilever Foundry, the company’s collaborative innovation network, are driving the Positive Beauty Growth Platform. To date, the Foundry has tested more than  400 startup projects, including partnerships with AI-powered skincare engine HelloAva and cleaning services marketplace Helpling.

Also in August, Unilever announced that its ice cream facility in TaiCang, China, has joined the World Economic Forum’s Lighthouse Network, a community of manufacturing sites. Lighthouse sites embrace and utilize Fourth Industrial Revolution technology to change corporate operations via innovation, sustainable practices, and increased efficiency. The TaiCang plant is Unilever’s third factory to achieve this designation.

Strong Profitability

UL’s 20.3% trailing-12-months EBITDA margin is 48.1% higher than the 13.7% industry average. Also, its respective ROC, net income margin and ROA are 77.8%, 100.3%, and 67.2% higher than the industry averages. Furthermore, its $10.17 billion cash from operations is 1833.2% higher than the $526 million industry average.

POWR Ratings Reflect Solid Prospects

UL has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UL has a B grade for Stability, which is justified given the Stock’s beta of 0.16.

Of the 68 stocks in the Consumer Goods industry, UL is ranked #11.

Beyond what is stated above, we have graded UL for Growth, Quality, Value, Sentiment, and Momentum. Get all UL ratings here.

Bottom Line

UL’s strategic choices and sharp focus on operational excellence have boosted its performance over the past years despite challenging market conditions. Moreover, it is expected to benefit from solid demand recovery across its priority markets of the United States, India, and China. So, considering the company’s solid profitability and remarkable dividend history, we think the stock could be an excellent addition to one’s dividend portfolio.

How Does Unilever PLC (UL) Stack Up Against its Peers?

UL has an overall grade of B in our proprietary rating system. This rating is superior to its peers, YAMAHA Corporation (YAMCY - Get Rating), Franchise Group Inc. (FRG - Get Rating), and Puma SE (PUMSY - Get Rating), which have a C (Neutral) rating.

UL shares were trading at $53.57 per share on Thursday morning, down $0.05 (-0.09%). Year-to-date, UL has declined -8.02%, versus a 29.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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