Unilever Results

[Raptor]

Moderator Message:
Thread has wandered off ops topic on Unilever, even for strategy. Can we get back to ops post. Thanks, in advance. Raptor .

[Darka]

Happy with Unilever myself,

As of Friday they became my third share to give back all of my original investment (along with BAE Systems and Legal & General) through dividends (26%) and capital gains (74%).

First bought in 2012, topped up in 2013 - wouldn't buy them now as they are my biggest holding, but not yet big enough to consider reducing.

They perform the job I bought them for, a nice steady ballast in my portfolio and great diversification.

regards,
Darka

[ADrunkenMarcus]

Me too, Darka.

Bought in 2013, I've got a capital gain of 75% and I'll have received 26% of book cost in dividends by the end of the tax year 2018-19. Total return CAGR about 15%; CAGR dividend growth at 6.7% (REAL, not nominal) and the current tax year's dividend should equate to over 5% REAL dividend yield on cost. My third largest holding.

Best wishes

Mark.

[funduffer]

One point on ULVR that perhaps needs emphasising:

Whilst ULVR may not be high yield, what it does do is: deliver a dividend that increases each year well above the rate of inflation.

In my HYP, it has delivered a higher dividend growth rate than any other HYP constituent.

If, like me, you value a year-on-year increase in HYP income above the rate of inflation, then you need shares like ULVR to deliver this.

High yielding shares that have flat dividends (GSK comes to mind), don't deliver anything towards this goal.

The likes of ULVR and IMB do, with growth rates circa 10%.

FD

[ADrunkenMarcus]

One point on ULVR that perhaps needs emphasising:

Whilst ULVR may not be high yield, what it does do is: deliver a dividend that increases each year well above the rate of inflation.

Definitely! The only issue for a HYP-er is being able to buy it on a decent starting dividend yield, knowing that in all likelihood there will always be other companies with a higher dividend yield at that moment. Over the long haul, Unilever *is* a high dividend yield stock insofar as the dividend yield on cost will climb very substantially.

Diageo is somewhat similar in that regard. Someone buying in 1998 would now be getting a nominal dividend yield on book cost of around 12%, from a starting dividend yield of 3.25% and a compound annual growth rate in dividends of under 7%.

Best wishes

Mark.

[Gengulphus]

One point on ULVR that perhaps needs emphasising:

Whilst ULVR may not be high yield, what it does do is: deliver a dividend that increases each year well above the rate of inflation.

In my HYP, it has delivered a higher dividend growth rate than any other HYP constituent.

If, like me, you value a year-on-year increase in HYP income above the rate of inflation, then you need shares like ULVR to deliver this.

High yielding shares that have flat dividends (GSK comes to mind), don't deliver anything towards this goal.

The likes of ULVR and IMB do, with growth rates circa 10%.

Agreed that you need such shares. But a historical record of increasing dividends like that and continuing to do so aren't the same thing!

Tesco is the example that springs to my mind. I bought it for my HYP in June 2011. At the time, its historical dividend record was (since 2001) 4.98p, 5.60p, 6.20p, 6.84p, 7.56p, 8.63p, 9.64p, 10.90p, 11.96p, 13.05p, showing increases of 12.4%, 10.7%, 10.3%, 10.5%, 14.2%, 11.7%, 13.1%, 9.7% and 9.1%. A fine record of dividend growth rates circa 10%, I think. And indeed, about a month later, its 2011 final results came out, producing a total dividend of 14.46p, a 10.8% increase completely in line with that.

Then in 2012, the dividend only increased to 14.76p, a 2.1% increase, and in 2013 and 2014 it was held. In 2015, only a 1.16p interim was paid and even that was cut in 2016 and 2017. And this year, it's resumed dividend payments with a total payout for the year of 3p...

That initial purchase was at a price of 406.97p, putting it on a historical yield of 3.21% at the time. That means that it did actually qualify as "high yield" by the HYP board's standards, though only very marginally: the FT gives the FTSE 100 yield on the date of purchase as 3.19%!

Of course, I wasn't judging it by the HYP board's standards that long ago - that board wouldn't exist for over 5 years to come, and its guidelines until over 6 years later. I simply saw it as an average-yielding share with a long and excellent dividend growth record and a nice forecast increase... Which demonstrates one of the pitfalls of the "invest in averagish-yielding shares when they have a history of excellent dividend growth" idea: if the growth disappears, there's nothing much to support the share price (Tesco has hardly been above my purchase price since, and then only in a few months later in 2011), especially if the dividend then disappears as well...

Just to be clear, I'm not saying anything against a history of rising dividends as an attractive feature of a share: IMHO it is one, and I use it myself. But like other attractive features of shares, it's vulnerable to disappearing... The best one can do IMHO is look for a good number of attractive features and hope a sufficient number of them don't disappear (or do, but in a nice way, such as a high yield disappearing because the share price rises strongly).

Gengulphus

[Dod101]

There are so many factors other than the historical dividend growth to consider although that has to be a good start. I am not sure that we will see 8% plus increases in the dividend as a regular feature of Unilever but I think the culture is good, the brands are excellent and in all it is one of the world's most successful companies in its field. I would be surprised if it does not maintain a steady increase in its dividend. It is not a High Yield share but it has that excellent combination of an increasing dividend accompanied by a steady and increasing share price.

The upcoming reconstruction, if it is accepted by shareholders (apparently it will need 75% of shareholders to approve it from both companies) is a bit of a distraction at the moment because I assume it will mean exchanging our current shares for shares in a new holding company but let's assume that the value of our shares will remain the same.

Dod

[Gengulphus]

The upcoming reconstruction, if it is accepted by shareholders (apparently it will need 75% of shareholders to approve it from both companies) is a bit of a distraction at the moment because I assume it will mean exchanging our current shares for shares in a new holding company but let's assume that the value of our shares will remain the same.

Yes, it's pretty clear from these results saying "Further to the announcement of the proposal by the Board on 15 March 2018, Unilever plans to hold general meetings for Unilever NV and for Unilever PLC shareholders on 25 and 26 October 2018 respectively. Documentation will be made available to shareholders at least six weeks ahead of the shareholder meetings." and the 15 March RNS announcement it refers to saying "Unilever intends to simplify from two legal entities, N.V. and PLC, into a single legal entity incorporated in the Netherlands." that it's got to involve something like that.

FWIW, I currently intend to vote all the shares I reasonably can against the reconstruction, on the simple basis of the old "If it ain't broke, don't fix it!" principle. Unilever is working very well at the moment and has been for years, so consisting of two companies with two boards of directors who have to co-operate with each other is at worst a very minor hindrance to the company, and it could be the secret of their success. Why change it?

I'm sure that their corporate advisers will be able to "identify inefficiencies in the current management structure that can be removed, leading to cost savings" or some such phrase. But frankly, they would say that, wouldn't they, considering that changes are likely to lead to further work for their companies and a lack of changes is pretty unlikely to do so? And the standard parent-and-subsidiaries-group-of-companies structure with a single board in charge doesn't have all that perfect a record of delivering the goods!

So while I'll make up my mind after seeing the promised shareholder documentation, it's going to take very convincing arguments to persuade me that this reconstruction is worth the risk of breaking the formula that has made Unilever as successful as it is.

Gengulphus

[Dod101]

I am very much of the same mind, not so much for the reasons that Gengulphus has mentioned, although I sympathise with these but rather because I am very reluctant to see what has been a very successful Anglo Dutch partnership go entirely Dutch. There is no getting away from the fact that the current structure is cumbersome, one only needs to read the Group Annual Report to see that, but something along the lines of the Royal Dutch Shell set up should work with incorporation in one country and Executive management in the other. I am also not very happy with the idea of putting up artificial barriers against takeover as it could lead to complacency and finally it will be a pity to lose Unilever PLC from the FTSE100. As shareholders in the PLC as most of us on this Board will be we can stop the reconstruction in its present form. It is a while until October but somebody should be preparing the ground.

Dod

[richfool]

Nick Train holds a few more shares than most of us. He thinks the move is not in investors' interest (Citywire article dated 16th May 2018).

Star fund manager Nick Train has added to his long-standing position in ‘exceptional’ Unilever (ULVR) but warned he may vote against the Anglo-Dutch company’s plan to collapse its dual structure and move its main headquarters to Rotterdam from London.

http://citywire.co.uk/investment-trust- ... s/a1120321

[StepOne]

... it will be a pity to lose Unilever PLC from the FTSE100.

I thought it was still possible that a London listing would be maintained?

StepOne

[Dod101]

Yes. According to them the London listing/quotation and trading on the LSE will be maintained but it is unlikely that the membership of the FTSE100 index will be. They can have one without the other. Falling out of the Footse100 means of course apart from the prestige angle, that they will no longer be held by index funds which shadow the FTSE100.

Dod

[dspp]

Dod,
If ULVR fall out of FTSE-100 index then demand will fall and share price will fall. Sounds like a fantastic opportunity to buy and get a better yield. Here's hoping !

regards, dspp

[StepOne]

The UK company just now is 10 times the size of the smallest FTSE 100 constituents, so unless they are planning a radical change to the regional weightings, surely they will remain in the index?

[PinkDalek]

The UK company just now is 10 times the size of the smallest FTSE 100 constituents, so unless they are planning a radical change to the regional weightings, surely they will remain in the index?

There was talk of this over at HYP -Practical back in June. I haven't re-read the thread but here it is:

viewtopic.php?f=15&t=12187

[Gengulphus]

The UK company just now is 10 times the size of the smallest FTSE 100 constituents, so unless they are planning a radical change to the regional weightings, surely they will remain in the index?

Briefly, it's not a question of it being relegated from the FTSE 100 to the FTSE 250 or lower in the UK index series, but of whether it remains eligible to be in that series at all. Becoming a purely Dutch-incorporated company rather than a "dual listed company" structure of a Dutch-incorporated company and a UK-incorporated one rather understandably calls that into question!

Gengulphus

[Breelander]

The UK company just now is 10 times the size of the smallest FTSE 100 constituents, so unless they are planning a radical change to the regional weightings, surely they will remain in the index?

Briefly, it's not a question of it being relegated from the FTSE 100 to the FTSE 250 or lower in the UK index series, but of whether it remains eligible to be in that series at all.

Quite. The case of Santander come to mind, it would ran 8th in the ftse100 if it were eligible to be included. Oh, and that would put it a couple of places above Unilever.
http://www.stockchallenge.co.uk/ftse.php

[Dod101]

The Finance Director of Unilever has said that it is unlikely that they would remain in the FTSE100 and that is after extensive discussions with the index admin people. As has been said this was discussed on the quoted thread. Obviously FTSE100 index funds will sell them but they will become a member of the equivalent index in the EU so that may balance the selling in London. But that is why I said that the effect of the reconstruction (If it is passed) is a bit of an unknown and unsettling aspect for the shares at the present time.

As I understand it it is in any case only the PLC that is a member of the FTSE. The larger (Dutch) NV is not so there may not be as much selling as we might think.

Dod

[idpickering]

The Finance Director of Unilever has said that it is unlikely that they would remain in the FTSE100 and that is after extensive discussions with the index admin people. As has been said this was discussed on the quoted thread. Obviously FTSE100 index funds will sell them but they will become a member of the equivalent index in the EU so that may balance the selling in London. But that is why I said that the effect of the reconstruction (If it is passed) is a bit of an unknown and unsettling aspect for the shares at the present time.

As I understand it it is in any case only the PLC that is a member of the FTSE. The larger (Dutch) NV is not so there may not be as much selling as we might think.

Dod

I don't mind admitting that all this doubt is causing me to consider dumping ULVR. Do I really want a share that isn't even listed here?

Ian.

[ADrunkenMarcus]

I don't mind admitting that all this doubt is causing me to consider dumping ULVR. Do I really want a share that isn't even listed here?

Yes!

But, then, I hold some foreign companies anyway such as Finnish Kone so I am perhaps more relaxed about foreign listed companies.

Best wishes

Mark.