We recently compiled a list of the 10 Best FTSE Dividend Stocks To Buy Now. In this article, we are going to take a look at where Unilever PLC (NYSE:UL) stands against the other FTSE dividend stocks.
The first half of 2024 has been notable for the UK equity market, as the FTSE 100, the benchmark index for UK company shares, hit a record high. However, stocks tumbled in the first week of June as financial shares mirrored broader losses in European markets. That was mainly due to the political uncertainty that unsettled investors and a slump in industrial mining stocks further dragged down the market. That said, with some time remaining in the general elections, there is still some potential for additional developments and surprises within the UK market. The index is up by nearly 6% this year so far, compared with a 14.3% return of the broader US market
The Bank of England (BoE) was one of the first central banks to begin increasing interest rates after the peak of the COVID pandemic. From December 2021 to August 2023, it raised the bank rate by 515 basis points to a 16-year high of 5.25% in order to address rising inflationary pressures in the economy. According to a Reuters poll of economists, the BoE is expected to begin cutting interest rates in August. Most economists also anticipate at least one more rate reduction this year, despite ongoing high inflation in wages and services. Yael Selfin, chief UK economist at KPMG, made the following comment on the situation:
“While we are seeing some tentative signs of cooling in the labor market, service sector inflation remains persistently high and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut.”
Overall, UK inflation is expected to remain slightly above the BoE’s target of 2.0% in every quarter until at least the end of 2025, according to the poll. Median forecasts indicated that inflation would average 2.5% this year and 2.2% next year.
After reaching new highs in 2024, the FTSE 100 may attract more investors, particularly those focused on income accumulation. The projected dividend yield of 3.8% for 2024 and 4.1% for 2025 is appealing, especially since these yields surpass the current inflation rate. Analysts predict that the ten largest dividend-paying companies in the UK will return £43.9 billion to shareholders, accounting for 55% of the total dividends from the FTSE 100. The top 20 companies are expected to contribute £57.4 billion, making up 72% of the total dividends.
In 2023, UK dividend growth of 5.4% aligned with the global average, according to a report by Janus Henderson. This increase was driven by substantial dividend increases from banks and oil producers, although it was tempered by lower payouts from mining companies. The report further mentioned that annual dividends in the UK grew to $86 billion in 2023 from over $63 billion in 2020.
While investors gravitate toward American dividend stocks, some of the best FTSE dividend stocks also offer similar investment opportunities.
Our Methodology:
For this article, we scanned through the list of FTSE stocks and picked dividend stocks from the list. From the resultant dataset, we picked the 10 best FTSE dividend stocks with the highest number of hedge fund investors tracked by Insider Monkey as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A supermarket shelf overflowing with a variety of fast-moving consumer goods.
Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 20
Unilever PLC (NYSE:UL) is a multinational consumer goods company that offers a wide range of related products. Stocks from the consumer staples industry are well-regarded for providing stability to investors’ portfolios, particularly for those aiming to generate income. Moreover, despite the ongoing AI wave, the companies in the consumer staples industry have shown stable results over the past quarters.
In the first quarter of 2024, Unilever PLC (NYSE:UL) posted a 4.4% year-over-year underlying sales growth and its volume growth also grew to 2.2%. In comparison, Procter & Gamble Co (NYSE:PG)’s sales volume remained flat during the first quarter. For 2024, Unilever expects its underlying sales growth to be within its multi-year range of 3% to 5%. The company’s financials have remained strong over the years. In 2023, its underlying operating profit came in at €9.9 billion ($10.59 billion), up 2.6% from the same period last year. This growth shows that the company has generated more earnings from its core operations, which eventually contributed to its shareholder return. In fiscal 2023, the company returned €5.9 billion ($6.31 billion) to shareholders through dividends and share repurchases.
Unilever PLC (NYSE:UL), which ranks sixths among the best FTSE dividend stocks, currently offers a quarterly dividend of $0.455 per share and its stock sports a yield of 3.27%.
Unilever PLC’s (NYSE:UL) strong financial position has prompted the company to implement proactive steps to improve its business. The divestment of its ice cream business is also expected to improve its balance sheet through a spin-off, which the board has determined is the most suitable choice at the moment. The transaction is to be finalized at the end of 2025.
At the end of March, 20 hedge funds in Insider Monkey’s database owned stakes in Unilever PLC (NYSE:UL), down by five over the quarter. The consolidated value of these stakes is over $952 million. Fisher Asset Management remained bullish on the stock, growing its position in the company by 33% in in the first three months of the year to 14.31 million shares.
Overall UL ranks 6th on our list of the best FTSE dividend stocks to buy. You can visit 10 Best FTSE Dividend Stocks To Buy Now to see the other FTSE dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of UL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.