A core part of my investment strategy is to boost my passive income stream through dividend payments. Could IG Group (LSE:IGG) be one of the best stocks to buy now to help me do that? Let’s take a look.
Online trading
As a quick reminder, IG Group provides an online, low-fee platform where people can invest and trade stocks, bonds, CFDs, and index trackers.
It is worth noting that in the past two years, online trading levels have surged. This was mostly due to the pandemic as people had more spare time on their hands due to lockdown, which also led to a bit more spare cash too.
So what’s happening with the IG share price currently? As I write, the shares are trading for 697p. At this time last year, the stock was trading for 868p, which is a 19% decrease over a 12-month period.
Many stocks have pulled back in recent months due to macroeconomic headwinds and the tragic events in Ukraine.
Even the best stocks to buy have risks
The obvious risk of buying a stock purely for its dividends is the fact that dividends can be cancelled at any time. This is because dividends are underpinned by performance. If performance dips, a business cannot return cash to investors. This is a risk I am wary of when reviewing stocks like IG for passive income purposes.
Next, competition in the online trading platform market is intense. One competitor of note is Plus500. With many firms vying for market dominance, IG could suffer from a loss of customers, which could affect performance and returns.
Finally, IG specialises in spread betting, which is classed as gambling here in the UK. Tighter regulations around this in the future could hurt performance and returns too.
The bull case and my verdict
So to the positives then. I can see IG has an excellent track record of performance in recent years. I do understand that past performance is not a guarantee of the future, however. Looking back, I see it has increased revenue and profit for the past three years in a row.
This excellent performance has underpinned consistent dividend payments, which have grown year on year too. IG’s current dividend yield stands at an enticing 6%. This is higher than the FTSE 100 average of 3%-4%. It even managed to pay a dividend during the pandemic period, where many other businesses suspended their payouts.
Finally, the IG share price pulling back has made the shares look really good value for money too. They’re currently on a price-to-earnings ratio of just seven. The general consensus is that a ratio of below 15 represents value for money.
Right now I do believe IG Group is one of the best stocks for me to buy to boost my passive income stream. For that reason, I would add the shares to my holdings.
