Over the last five years, Unilever (LSE:ULVR) shares haven’t been explosive. In fact, the consumer brands company has only grown its market-cap by around 8%. Yet, it remains a popular favourite among British investors thanks to its dividend, which has been steadily ticking upward since 2009 by an average of 5.2% a year.
So how much money can investors start earning passively if they snap up 500 shares today? And could this income stream continue to expand in the future? Let’s take a closer look.
Passive income potential
At a share price of around 4,640p and a dividend per share of 150.21p (after converting from euros), Unilever shares currently offer a respectable 3.2% yield. That puts the cost of 500 shares at £23,200 – quite a substantial investment, but in return, investors can start earning just over £750 as a reward.
Compared to other dividend opportunities listed on the London Stock Exchange, this income may seem a bit lacklustre. For example, both Reckitt Benckiser and Diageo offer a more substantial 3.9% yield. However, a big part of Unilever’s appeal is its ability to continue raising dividends over time.
With that in mind, what are analysts projecting for the future?
| Year | Dividend Forecast | Forward Yield | Passive Income From 500 Unilever Shares |
| 2025 | 149.88p | 3.2% | £749.4 |
| 2026 | 155.4p | 3.4% | £777 |
| 2027 | 158.2p | 3.4% | £791 |
| 2028 | 161p | 3.5% | £805 |
| 2029 | 163.8p | 3.5% | £819 |
In terms of future growth, it seems the rate at which Unilever’s expected to expand its dividends is slowing. As such, buying shares of this enterprise may not make much sense for investors focused on maximising income growth.
However, for those more interested in protecting existing wealth and securing a reliable source of income, say during retirement, a closer inspection could be warranted.
What’s next?
Forecasts always need to be taken with a pinch of salt, especially when looking out almost five years into the future. That’s especially true in the case of Unilever, which pays dividends in eurocents rather than British pence, introducing additional foreign currency exchange risk.
As of July 2023, Hein Schumacher was brought on board as the new CEO. The previously mentioned lacklustre expansion of Unilever’s market-cap didn’t go unnoticed by shareholders who criticised previous management’s lacklustre strategy execution.
Under Schumacher, the company’s simplifying its product portfolio, eliminating underperformers while doubling down on its most successful higher-margin brands. This also opens the door to more sustainable long-term pricing power that will help bolster underlying operating margins, particularly in emerging markets where there is a rising middle class.
Will this new strategy be a success? There have been a few early signs of progress, but the turnaround still has a long way to go. And should this transformation process stall, it could leave the company in operational limbo. In the meantime, the growing maturity of Unilever’s oldest brands, like Dove and Hellmann’s, may suffer if consumer preferences start to shift. After all, there’s plenty of newer, often cheaper competition stacking the shelves.
The bottom line
Despite its challenges, Unilever still appears to have plenty on offer for defensive investors. And if Schumacher’s streamlining strategy proves successful, current dividend growth forecasts could be revised up. With that in mind, Unilever shares seem worthy of a closer look by those seeking a reliable income stream.
