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Unilever
#1
I hold UL. I also use a few of their products regularly; Hellmann's (Best) mayo, Suave personal care products, Dove soap, Lipton tea products, Bertolli cooking oils & Vaseline products. Then there's Ben & Jerry's, Breyers (can't tell my wife not to purchase this), Pond's cold cream, Tresomme & Axe personal care products, Knorr soup products and a bunch more.

Anyway, I checked in on the latest conference call on Seeking Alpha and it was a very interesting read. The CFO and James Allison, who was unidentified as to position, spoke frankly about the performance and challenges they face. It was refreshing to not have to wade through a recitation of the financial statements and a bunch of mumbo jumbo on how they were going to fix it.

I'm not going to go into the financials nor compare it with its competitors here. It holds its own with PG and CL and near the bottom of its 52-week range with a P/E that's not outrageous. I just wanted to point out what I like to hear about a company in its conference call. I can read the financials whenever I want. In the meantime, I'll keep slurping up that 3.8%ish yield.
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How do they get the deer to cross at that yellow road sign?

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#2
I had the same thoughts, DW. I like how frankly they were talking about the headwinds and the challenges ahead - instead of sugar coating it. Even using words like "deflation" - something most economists, executives avoid like the plague.
It gets more and more attractive by the day. I might just pull the trigger if it falls below $38...although current eval isnt so bad either.
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#3
(10-24-2014, 12:21 PM)Roadmap2Retire Wrote: I might just pull the trigger if it falls below $38...although current eval isnt so bad either.

This line of thinking never resonated with me.

It's a 2.7% price difference between $39.05 and $38. Aren't you going to hold the company for years + decades?

The last 10 year average P/E was exactly 20. It stands at 16.5 right now.

The price was over $45 as recently as July.

UL currently pays a dividend of $1.52 / yr.

At $39.05 that's a 3.892% YOC.
At $38 that's a 4% YOC.

Extrapolated out with dividends reinvested for decades its going to make *some* difference, but is it worth the risk of passing on a blue chip company at a great value?

This is how people continually missing buying KO, PH, WAG, CL, CLX, MO ....
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#4
Yeah its silly - its all just psychological - that 4% yield number would just convince me that I am getting a good rate, even though 3.86% isnt bad whatsoever. Over the long run, it really doesnt matter if I paid $38 or $39 for those shares. Besides, I wont be making a large purchase anyway...I will probably average in over few months (or years?). For a stable consumer defensive stock such as UL, a bit of a premium is really ok. You are right that considering the average of the past few years, UL looks pretty good. Even the yield looks good @ current yield 3.86% against a average yield over the past 5-yrs of 3.7%.

Thanks for the reminder and the kick in the butt Smile
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#5
I know it puts me at a disadvantage, but I find that I am really hesitant to jump in on companies based outside the US. Maybe you all can help me get over that bias.

UL's dividends are not paid in dollars. So the amount you receive each quarter is adjusted according to prevailing exchange rates? And in addition to that, it looks like, in its native (?) currency, the dividend trend has generally been upwards, but not in a smooth fashion.

Doesn't that all add up to a degree of uncertainty that doesn't exist with US-based companies? It makes it much harder for me to look at a company like UL and have a sense of what the dividend is going to look like down the road. And with plenty of other consumer staples companies to choose from...

Or am I getting too focused on noise and ignoring a terrific opportunity?

And are there also tax implications to navigate?

Thanks!
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#6
Kerim, the original intent of my post was just to laud the frankness and lucidity of UL's management during the conference call. Both guys were so well-spoken it puts the majority of conference call discussions to shame. To me, it was refreshing. I get bored when management starts reciting what is already shown in the financial statement release or starts speaking in industry jargon about the business. It doesn't bring much to my understanding of their SWOT analysis of the business or environment they are operating in. I've said it before; I am as much a "story" man as well as looking at the numbers type. I was not trying to call out a company that everyone should be thinking of purchasing.

I agree, it's been a bumpy road and the company has and continues to have many challenges. In addition, you mustn't overlook the effects of currency volatility on the dividend stream nor the "law of large numbers" that UN/UL has (or PG, MCD or CL or any number of companies that have significant business overseas) that makes it hard to grow even 8% per year consistently. I have to admit, CL seems to be managing it better than others so far.

As to the bumpy dividend in the home currency, I agree with you and knew that going in. But I also looked at their brand portfolio and management's focus on shedding the low-growth or non-essential products and investing in regional brands they think will benefit them. PG does the same. CHD does it also and ended up being a condom & sex toy vendor in addition to their other fine brands. (Had to mention the Trojan lineup just because I think it humorous.) Can't speak to CL since I haven't looked at them in a while as it's usually out of reach and too low a yield for me.

As to the tax consequences. Unilever is a conglomeration of a Netherlands-based company, UN listed in the U.S., and a British-based company listed as UL. It's a quite complicated business structure as many seem to be in the Eurozone. The U.S. has tax treaties with Great Britain that provide for no withholding of taxes on dividends for holders in qualified retirement plans. Don't know about taxable accounts but there you already get the foreign tax credit unavailable to pre-tax retirement accounts. There is no such agreement with the Netherlands. So, dividends come in with no withholding for me although still see the effects of currency translation.

I'll address the currency effects but I think we ought to start a new thread ... so I will but first I need to get back to my office and finish the cleaning I started yesterday before the customers start calling again.
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How do they get the deer to cross at that yellow road sign?

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#7
Morningstar's DividendInvestor has a fair value estimate of $44 a share on UL.

It is undervalued, according to that estimate. They also forecast a 7% annual dividend growth rate over the next 5 years. Of course, currency fluctuations will determine how that translates into US$.

I own it, having bought it at about this level back in September.
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#8
Well, another quarterly conference call with the CEO, Polman, giving opening remarks this time. And again, management speaks with lucidity acknowledging challenges and actions. Maybe it's a lot of BS ( <---- that's not a ticker symbol Tongue ) but I still find their comments interesting and am assuming the analysts on the call would call them out on any outlandish statements.

I haven't finished reading it because I'm overloaded right now and have to get ready to travel to a family member funeral tomorrow but I'm printing out a copy to read in the car. If you're interested, it's posted on Seeking Alpha here.

Oh, and I haven't gotten around to the comments on currency fluctuation for you, Kerim. Sad I apologize. Maybe someday I'll find time to compile the folder of notes I've taken.
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How do they get the deer to cross at that yellow road sign?

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#9
Today I was looking at Unilever. I already own PG but the idea was to see if I should open a new position or maybe simply sell PG and transfer the money here. Well the company certainly looks good, there is a lot to like such as the great proucts, the large dividend increase, the new buyback program etc BUT... I'm seeing a P/E of around 30. 30!!!

Is it just me or is this way overpriced right now?
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#10
I have had UL on my buy list for some time now. But it has run up so far now that I took it off my buy list. I mean for 5 years this stock did nothing except trade in a tight range between $40-45. I would be a buyer if it pulled back to $50 or so. Too expensive at these levels. I would much rather be in GIS. Stock is down quite a bit off its highs.
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