Due to soaring inflation, I’m looking for quality shares to buy for my holdings that cab boost my passive income through dividends. One dividend stock I like the look of right now is Phoenix Group Holdings (LSE:PHNX). Here’s why I would add the shares to my portfolio.
Retirement planning and savings
As a quick introduction, Phoenix is a long-term savings and retirement business with products to help people thinking about that next phase of life. In fact, it is the largest of its type in the UK, with over 13m customers and nearly £310bn of assets under management.
So what’s happening with Phoenix shares currently? Well, as I write, they’re trading for 663p. At this time last year, the stock was trading for 649p, which is a 2% return over a 12-month period. Since the stock market dip in March caused by the invasion of Ukraine, the shares have returned 18% from 560p to current levels.
A dividend stock with risks
One way that Phoenix has grown to become one of the biggest businesses in its sector has been shrewd mergers and acquisitions (M&A). Although this can be a positive in my eyes as it helps boost growth and returns, there is an element of risk involved too. M&As can be costly and sometimes a mistake. Firstly, Phoenix could overpay for a business which could affect its balance sheet and returns. Next, if the new business fails to integrate, disposing of the business could be costly operationally and financially too.
As with any dividend stock, dividends are never guaranteed. They can be cancelled at any time at the discretion of the business. A couple of reasons can prompt this. One could be poor performance and another could be an extreme event like a financial crash.
The bull case
So to the positives then. The savings and retirement sector is a burgeoning market. The UK has an ageing population and in recent years there has been a renewed emphasis on planning for retirement. This should boost firms like Phoenix and its performance and returns.
Next, Phoenix shares offer a dividend yield of close to 7.5% which is extremely enticing. This is higher than the FTSE 100 average of just 3%-4%. It also has a good record of consistent payout. Even in the face of the pandemic, it did not cut its dividend, which is an encouraging sign for me as a potential investor.
At current levels, Phoenix shares look good value for money on a price-to-earnings ratio of just 7. This indicates to me that a dividend stock like this is trading at less than expected levels and could be a shrewd addition to my holdings.
Finally, I like the look of Phoenix’s performance track record. After all, performance underpin returns and dividends. I am aware that past performance is not a guarantee of the future, however.
Overall, I believe Phoenix Group Holdings is an excellent dividend stock. I would add the shares to my holdings and expect them to boost my passive income stream for the foreseeable future.
