Up almost 20% in a year, why the Unilever share price may keep rising

with Unilever (LSE: ULVR) share price near 4,179p, a gain for shareholders of just over 17% in the past year.

But in August 2019, the stock topped 5,000p. And I think that fast-moving consumer goods (FMCG) companies seem to be coming back, with more progress. However, positive expectations are not nailed-on certainty. And that’s because even quality companies can suffer from operational setbacks from time to time.

Stable trading and financial records

However, my optimism is based on the stable nature of the company’s financial and trading records. Companies in the FMCG sector are known for the way brand strength tends to drive customer loyalty. And that often leads to a lot of repeat custom, which is good for cash flow.

With Unilever, we are talking about names such as Bovril, Cif, Colman, Comfort, Marmite and Parsley. But only a few of the 400 brands are owned by the company worldwide.

And they have worked well for the business. For example, the compound annual growth rate (CAGR) for revenue, earnings and cash flow are all positive. And it’s running at a low single-digit percentage.

That steady performance has led the directors to increase the dividend. And the multi-year growth rate for shareholder payouts is running close to 3.35%.

Now the figures do not drop the bottle. But consistency is what matters. For example, the pandemic is almost unrecognizable in these numbers. And the company kept paying its all-important dividend during the crisis.

A less demanding price

Meanwhile, the price is now less demanding than a few years ago. For example, the historical dividend yield is around 3.6%, based on the 2022 figure.

But I think the company has the potential to maintain a dividend CAGR close to its current level over the next 10 years. And if that happens, the dividend for 2032 will be about 39% higher than for 2022.

In that scenario, the share price would need to rise to just above 5,800p to maintain the current dividend yield. However, actual results will depend on many variables. For example, Unilever reports in euros, so currency exchange is a risk. And another is that trade may not continue smoothly for the next decade.

But also, trade may be better for business than ever before. And investor sentiment could improve causing prices to rise again. Nothing is certain. But businesses also have a habit of buying back their own shares. And that tendency could add support to share prices in the year ahead.

Meanwhile, February’s full results report remained steady. And chief executive Alan Jope said the business has improved its growth profile. For example, as part of the move, the company recently sold its global tea business and acquired it Nutrafol.

Overall, the outlook statement is positive. And Unilever should now be examined as a candidate for a diversified long-term portfolio.