Down almost 10% from its high, is this FTSE 100 stock a passive income?

Like drinking water, writing a to-do list, and staying off social media, some of the best ideas are straightforward. And that may be the case when it comes to earning income.

In spite of FTSE 100 hitting record levels, sharing in Unilever (LSE:ULVR) is about 10% off its 52-week high. So should investors stop overthinking and start buying stocks?

Unilever business

Investors who don’t read the label on everything they buy are probably familiar with more Unilever products than they care to mention. But the business is actually in the process of changing its strategy. It goes from trying to get into people’s closets by having every branded product under the sun to focus on its strong brands. This includes the likes of Houses, A doveagain Persil.

Divided lines include Alberto Balsam (my favorite), Brylcreem (which I don’t), too Lever 2000 (which I have never heard of). It also sells its ice cream unit, which includes This is Ben & Jerry’s again The Magnum.

Despite the change, the basic business model remains the same. The firm’s products give it bargaining power and its distribution network helps it position its products worldwide.

Assignments

Unless something really desperate happens, I don’t think the demand for the kind of products that Unilever sells will drop much. And the company is in a strong competitive position.

Investors may therefore see the recent decline in the share price as a potential buying opportunity. The dividend yield is around 3.2%, which doesn’t seem like much but that could change if interest rates fall. This is roughly in line with the stock’s 10-year average. But Unilever’s portfolio restructuring has led to good sales growth, so I think there’s a good chance the dividend will go up from here.

I think investors looking for income would do well to consider shares in a company with tangible potential. Especially if it might have a bright future.

Accidents

Unilever is far from the frontier of technological innovation. But there are still some important risks that investors considering the stock should be aware of. One of the company’s biggest challenges is that its products often have no replacement costs. People don’t have to buy A dove soap because it is the only one that goes with their bathroom sink.

As a result, there is always a risk that customers will trade down to cheaper stores – or the other way around Procter & Gamble products. That means an ongoing battle for market share, where nothing is certain.

Investors should be aware of this when considering the stock. But it is also important to note that a large marketing budget gives Unilever an advantage in keeping its products at the forefront of consumers’ minds.

A stock to consider

In the beginning, Unilever’s business is not very difficult. But there’s a lot going on behind the scenes to help the FTSE 100 company hold on to its market-leading position.

That could be a good combination for investors. And since the stock is down about 10% from its 52-week high, I think it’s worth considering at today’s prices.