Boosting my passive income stream through dividend stocks is a pivotal part of my investment strategy. One potentially underrated share I feel could be a good option for me is 4imprint Group (LSE:FOUR). Here’s why.
Promotional marketing
As a quick reminder, 4imprint is a business that specialises in promotional marketing materials for businesses. It creates, and sells materials such as branded pens, bags, mugs, banners and much more for businesses to boost their marketing efforts.
So what’s happening with 4imprint shares currently? As I write, they’re trading for 3,720p. At this time last year, the stock was trading for 2,882p, which is a 29% increase over a 12-month period. 4imprint shares have bounced back nicely from the stock-market correction of March, which was caused by the tragic events in Ukraine.
A passive-income stock with risks
Firstly, marketing budgets and 4imprint’s performance have come under pressure in recent times. At first, the pandemic had a negative impact as the stay-at-home guidance caused firms to cut marketing spend to conserve cash in volatile times. 4imprint has bounced back from this based on recent performance updates.
The other aspect is the current economic crisis caused by soaring inflation. This inflation could lead to firms once again spending less on marketing as they have other essential costs they are worried about.
Next, as with any income stock, it is worth remembering that dividends are never guaranteed. They can be cancelled at any time at the discretion of the business. This is to help conserve cash in the face of a pandemic or financial crisis or recession for example.
Why I like 4imprint shares
So to the positives then. I am buoyed by the fact that 4imprint has a great performance track record over a long period of time. I am aware that past performance is not a guarantee of the future. However, looking back, I can see it has doubled sales and profit in the past five years.
Next, for any income stock, I want to know the dividend yield on offer. At current levels, it stands at a modest 1.5%. This is where I feel the stock could be underrated. This is because the business has a healthy balance sheet with lots of cash that I would expect to be returned to shareholders as it continues its impressive performance and growth trajectory.
Finally, pent-up demand post-pandemic should serve 4imprint well and boost performance and returns, in my opinion. In a recent trading update, it said that customer demand is at record highs, which it should be able to leverage into trading momentum and reach a sales target of $1bn for the current fiscal year.
Overall, I believe 4imprint Group is a passive income stock that should grow its level of returns nicely in the longer term. This fits in nicely with my buy-and-hold approach. A cash-rich balance sheet, the fact it is operating in a burgeoning market and the current dividend on offer boosts my investment case. I plan to add 4imprint shares to my holdings in the coming days!
