Unilever: The European Dividend Aristocrat For ESG Investors

Billy Toh

March 16, 2022

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There are plenty of opportunities in the European market if investors are willing to look past the current Russia-Ukraine war.

As a long-term investor, my preference is to take advantage of the current volatility in the market to build up positions in companies that have a strong track record.

I find it best to start by focusing on companies that have a strong dividend track record. Personally, I will usually look at dividend aristocrats, companies that not only consistently pays a dividend to shareholders but also raises its dividends consistently for at least the last 25 years.

I have written about the “5 Big European Dividend Stocks Any Investors Can Buy” at the beginning of this month and most of these companies can be considered as dividend aristocrats.

However, I wanted to focus on Unilever PLC (LSE: ULVR) today, one of the biggest consumer staple companies globally with some of the strongest consumer brands in the world.

In fact, what I like most about the company is its excellence at meeting the Environmental, Social and Governance (ESG) challenges.

Here are five reasons why I think ESG investors should build up their positions in Unilever:

1) Strong Dividend Track Record

As mentioned earlier, Unilever is a dividend aristocrat and has a strong dividend track record. In FY2021, the company’s dividend jumped by 3% and at its current price, dividend yield is at an attractive 4.5%.

Personally, I don’t emphasize too much on the dividend yield but when companies with Unilever’s track record, exposure and brand name offers a dividend yield above 3%, it usually gets my attention.

In terms of its dividend growth, it has a 10-year compounded annual growth rate (CAGR) of 4.8%.

The strong dividend track record allows ESG investors to build up a resilient portfolio as not all of the companies that focus on doing good can make sustainable earnings like Unilever.

2) Focus to be the force for good

Unilever is one of the examples of companies that shows that doing good and making money have no contradiction.

The company has a goal to make sure its growth is unaccompanied by environmental impact, in part by sourcing all of its raw materials through sustainable agricultural practices.

The company has clear goals to improve the health of the planet by reducing its greenhouse gas impact of all of its products by half across all lifecycles by 2030. This is in line with its target to achieve zero emissions in all of its operations by 2030.

So far, the company is ahead of its timeline with production across all five continents being powered by renewable energy.

Below is the compass strategy for the company with a focus on sustainability.

Source: Unilever’s Compass Strategy

The company also reports some of the key metrics of its progress towards the goals that they have set.

From the chart below, we can see that Unilever has managed to reduce its carbon footprint, usage of water and accident rates.

Source: Unilever’s Charts 2021

3) Diverse opportunities and strong brands under Unilever’s portfolio

There are a variety of opportunities in Unilever’s product portfolio. It has a substantial market share within the consumer staples industry. Some of the company’s higher-performing brands have the potential to drive earnings growth and margin.

This is because Unilever’s businesses are supported by strong brands. While growth is likely to be slow, these brands can continue to grow into international markets and have substantial expansions while supported by their home market.

Source: Unilever FY2021 Review and Strategic Outlook

4) Strong performance in FY2021

Unilever delivered strong results in 2021, bolstered by their improved margins. There has been pricing growth in many of their critical products with inflation. It is beneficial that the company can offset these costs to the consumer, so the bottom line wasn’t hurt too bad.

Their 2021 delivery was strong, which should bode well for coming results. It’s good to know that a mature company like Unilever has a robust cash flow and has continuously benefited from its bottom line.

Source: Unilever FY2021 Review and Strategic Outlook

5) Accelerating Growth in US, India and China

Another key strength that Unilever has is the accelerating growth in key markets such as the US, India and China.

While there was a big dip in India and China due to the COVID-19 pandemic, we have seen a sharp recovery in these markets and with the management emphasizing its presence in these three markets, I believe Unilever will have an upper hand against some of its peers in this fast growing markets.

Unilever has a strong growth in key markets such as US, India and China

Source: Unilever FY2021 Review and Strategic Outlook

Unilever is a global leader in sustainable business

I can continue elaborating on why ESG investors should buy into Unilever but the simple answer is this: Unilever is a global leader in sustainable business.

With a strong track record and purpose to make sustainable living commonplace, ESG investors will find Unilever the right fit for their portfolio.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.