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Here’s a dividend stock with growth potential in 2022

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2022 is going to be a year of rising costs and rising interest rates if the experts are correct. This means I am looking for stocks to invest in that could actively benefit from meeting these specific criteria. I think I have found at least one. Pleasingly, I think it is a dividend stock with growth potential.

The stock I am referring to is Moneysupermarket.com (LSE:MONY). I expect it to make something of a comeback in 2022. For my money, Moneysupermarket.com has the makings of a solid long-term investment for my portfolio. Let me explain my thinking.

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Growth has stuttered

The company has found things tough over the past 12 months. According to its most recent financial statement in October, revenue was down 11% year to date compared to the corresponding period in 2021. Obviously, this was not good.

It goes a long way towards explaining why the share price has been trading so low. Investor sentiment has cooled, with the stock at almost half the price it was three years ago. 

That’s the bad news. The good news is that the firm has taken steps to address this.

Proven model and new advertising

The price comparison model is one long proven to work. If consumers want to save money on household or financial products, they know a visit to a price comparison website should help them do that. 

So, to compete, this means Moneysupermarket.com need to shout louder than its major rivals, such as Go Compare and Compare The Market, in order to grab increased share of wallet.

The Moneysupermarket.com brand was relaunched last autumn with a well-received advertising campaign. The fact that it identified the need to reposition its brand demonstrates customer-centric awareness and a willingness to respond to changes in a competitive market. Taking steps to make the brand more competitive is only a good thing.

It remains a good dividend stock

While it’s good to see Moneysupermarket.com actively changing its advertising to be more competitive, I don’t think this is going to be the key driver of rising revenue. I think increased revenue will come from increasing numbers of consumers switching financial products more readily in 2022. The changes to advertising kick-start this, in my view.

Why do I think this? Well, I expect consumers to spend more money throughout the year on the things they want to enjoy, in very general terms, simply because I expect the Covid-19 shackles to come off. I believe there is going to bean  increased desire to save money on the boring things in life, such as utility bills, in order to free up funds for more ‘adventurous’ spend, such as holidays. This will be especially the case if inflation takes hold and household energy costs continue to rise. Don’t get me wrong, it is only a personal hypothesis, but one that I think stands up to scrutiny bearing in mind the last two years.

Moneysupermarket.com look in decent shape financially, so I do not have any concerns on that score. To cap it off, the company remains a good-looking dividend stock, with an expected dividend yield of around 5.3%. All in all I have warmed to this stock. I think it could be a shrewd longer-term investment for my portfolio.

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And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

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Garry McGibbon has no position in any of the stocks mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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.

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