A core part of my investment strategy is to boost my passive income stream through dividend payments. A dividend stock I plan on adding to my holdings is Ediston Property Investment Company (LSE:EPIC). Here’s why I’m bullish on the shares.
Real estate investment trust
Ediston is a real estate investment trust (REIT) that aims to provide shareholders consistent and lucrative returns through investing in commercial property. It targets three main commercial property sectors, which are offices, retail including warehouses, and industrial property.
As a REIT, Ediston must return 90% of profits to shareholders as dividends. I already own a number of REITs as part of my portfolio.
So what’s happening with Ediston shares currently? Well, as I write, they’re trading for 76p. At this time last year, the stock was trading for 68p, which equates to an 11% return over a 12-month period.
A dividend stock with risks
One of the biggest issues that any REIT faces is that of rent collection and vacancy in times of economic volatility. Current macroeconomic challenges, such as soaring inflation, rising costs, and a supply chain crisis are causing problems. A cost-of-living crisis has emerged. This could hurt Ediston as consumer spending could fall and occupancy levels in its properties could fall too.
Ediston has a lot of properties in retail, and a focus on retail parks, which could be negatively affected by the issues noted above. Performance and dividends could be affected by any downturn in rent collection and occupancy.
Next, as with any dividend stock, it is worth noting that dividends are never guaranteed. I know that dividends can be cancelled at any time at the discretion of the business. Typical reasons for this include economic volatility, a financial crash, or a pandemic like in 2020. Cancelling dividends allows businesses to conserve cash.
Why I’m buying the shares
So to the positives then. The first thing I look for when investing in any dividend stock is that of the dividend yield. Ediston’s yield is currently just under 7%, which is enticing. To provide some context, the FTSE 100 average is 3%-4%.
Next, Ediston shares look excellent value for money to me right now on a price-to-earnings ratio of just four.
Alongside these bullish aspects, I like the look of Ediston’s performance track record. For any dividend stock to provide stable returns, performance must be consistent. I am aware that past performance is not a guarantee of the future, however. I can see Ediston has recorded consistent revenue and gross profit for the past four years.
Finally, Ediston’s focus on retail properties could yield great returns for many years to come. I found that this specific property segment is tipped for growth. This is due to the e-commerce boom and rising demand for convenient click-and-collect options.
I believe Ediston could be an excellent dividend stock to boost my passive income stream. The shares look dirt-cheap, the dividend yield is great, and the business is focusing on a potentially lucrative segment for future growth too. I will be buying Ediston shares for my holdings.
