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Top dividend shares: is Unilever worth buying over Molten Ventures?

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Many top FTSE 350 shares pay dividends to shareholders year in, year out. Indeed, it can be a great way to create additional income and I have found this a useful strategy in recent years. Unilever (LSE: ULVR) is one of the top dividend shares that has paid consistent dividends to shareholders. A leader in the fast-moving consumer goods (FMCG) market, Unilever has an average dividend yield of 3.04% over the past five years, although this has declined slightly since 2019.

If I had £10,000 to invest, what amount of dividend payments would I have received from 2016 to 2020 from Unilever shares? In total, I would have received £1,520 in dividends over those five years – equivalent to 15.2% of the original holding itself. This, together with any growth in the share price, tells me that this is a low-risk investment. Personally, I would not be directing £10,000 to Unilever shares, because I think I can get better returns elsewhere. With a much larger sum of money, however, this dividend yield becomes a more attractive option. If I were considering a £100,000 investment, for example, Unilever may be one of the better destinations. 

If this level of dividend yield is not attractive for me, where else could I put my £10,000? Instead of focusing on income, I could find a smaller-scale accumulation stock with big potential. Molten Ventures (LSE: GROW) is a FTSE 250 stock that gives investors exposure to private tech companies. This company does not pay a dividend and instead retains its earnings. These retained earnings may be found in company annual reports and Molten Ventures figures show impressive growth over the last five years – about 77.2% year-on-year. Together with other fundamental factors, retained earnings may give clues about how well an accumulation stock is actually growing. Essentially the main question to consider is whether a stock like Molten Ventures is putting the earnings to good use or is it preferable to have this money paid out of the stock to shareholders.

If I decided to choose an accumulation stock, I would first need to ask myself a number of questions. Am I confident in the company’s leadership? Is the leadership following through on promises? Is the company growing? In Molten Ventures’ case, only two years ago the then-AIM 100 listed company publicly stated its desire to enter the FTSE 250, which was achieved this year. Furthermore, a number of private companies funded by Molten Ventures have gone public, including Cazoo, Trustpilot and UiPath. For me, both these factors are strong indications that Molten Ventures is deploying retained earnings effectively and I think my £10,000 would be better invested in this stock rather than in Unilever for its dividends. My decision might be different if the amount available to invest was much greater, when I might deem the dividend yield to be significant.   

The post Top dividend shares: is Unilever worth buying over Molten Ventures? appeared first on The Motley Fool UK.

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Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.