Investing for a second income can be a smart move, especially when considering Unilever (LSE:ULVR) shares. With a solid portfolio of brands in a stable sector, these shares could potentially offer long-lasting dividends. However, recent increases in share prices have caused the dividend yield to decrease. Despite this, there’s hope for a turnaround in 2025, making it crucial for investors to be prepared.
Points of Consideration:
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Dividends:
- In 2023, the dividend yield on Unilever shares almost reached 4%, a rare opportunity for passive income.
- Over the past decade, such a high yield has only been available once before.
- Currently, due to a 20% increase in stock value, the dividend yield stands at 3.2%, making it less appealing for investors.
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Inflation:
- Rising inflation in the UK has led to the Bank of England being cautious about reducing interest rates, a trend that may continue into the future.
- Businesses may raise prices to cover costs, potentially increasing consumer buying power due to higher National Minimum Wage, affecting demand and supply balance.
- Second Chances:
- Although Unilever’s rising stock value is partly due to brand growth and divestments, there is no guarantee that interest rates alone will drive stock prices down to achieve a 4% dividend yield.
- Investors should be alert to potential stock drops that could make investments more appealing, especially with high inflation posing consumer risk in products with no switching costs.
Being prepared for investment opportunities is key. For dividend investors considering Unilever shares, keeping a close watch in 2025 could lead to a more favorable investment scenario. While a significant price reduction may be necessary to achieve a 4% dividend yield, the company’s dividend growth prospects could make it a more viable option in the future.
