Friday, 17 February 2017

Unilever Back on Board (Just in Time!)

Unilever is one of the world's leading suppliers of fast-moving consumer goods. Some well-known brands include Marmite, Flora Margarine, PG tips, Pot Noodle, Ben & Jerrys Ice Cream, Colman’s Mustard, Magnum Ice Cream, Hellmann’s Mayonnaise and in personal care - Dove soaps,  Lynx Deodorant, Sure Deodorant, Vaseline, Brylcreem

The company states that more than 2 billion consumers worldwide use a Unilever product every day.

As part of my revised strategy to wind down my individual shares portfolio, Unilever was sold last April at the price of £33 and the proceeds recycled into Vanguard Lifestrategy which has done really well partly due to the boost from the fall in sterling post the referendum.

Luck

Strangely, this fall in the value of the pound has resulted in me revisiting Unilever because their dividends are in Euros and after conversion, investors in the UK get around 15% more now compared to previous years. This, combined with a dip in the share price following the full year results persuaded me to bring the shares back into the fold as I have spare cash earning nothing in my SIPP account.

The shares were repurchased just two weeks back to qualify for the final dividend. The price was £31.60, slightly below my sale price last year.

Today the shares were boosted to £38 by the announcement of a bid from Kraft Heinz for $143bn. The offer has been rejected by Unilever but as this is the opening gambit, I am sure there will be an increased offer down the line.

Luckily I am sitting on an instant gain of 20% which should help to offset some of my capital losses on other holdings - Next, Amec Foster etc. this past year or so.

I will wait to see how the bid unfolds and in the meantime collect the quarterly dividends which have been boosted by the fall in sterling. Kraft now have 30 days to come up with an increased bid.

Dividends

A 4th quarterly dividend of 32.01 euros - 27.68p will be paid in March. This will make a total of 128 euros for the full year. I expect an uplift for the coming year to around 135 euros which would translate to ~115p compared to 109p in 2016.

Unilever is one of those companies with strong brands and a wide economic moat which helps it to maintain an edge over competitors and provide good long-term returns for patient investors. It is a top holding for Nick Train’s Finsbury Growth & Income Trust comprising around 9.0% of the portfolio.

Although dividend income will be affected by currency fluctuations, these things have a way of balancing out over the longer term. In any event future divis may well be in US dollars soon!

Feel free to leave a comment below with your thoughts on the takeover bid.

Update Sunday 5.30 pm
Looks like the merger is off as Kraft have reportedly decided not to pursue a deal.

2 comments:

  1. Sometimes it's better to be lucky than smart. Great timing DIY investor!

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  2. Update 7th March.

    Decided to cash-in my chips today and offload at £39.20 - total return of 23% in just over a month.

    ReplyDelete