One stock I believe is perfect for boosting passive income is Britvic (LSE: BVIC). Here’s why.
Branded soft drinks
Britvic creates and sells some of the best soft drinks I’m sure you are familiar with. These include Tango, J2O, and Robinsons to mention a few. In addition to this, the business has a lucrative and exclusive agreement with drinks giant PepsiCo to bottle and distribute its products too.
As I write, Britvic shares are trading for 827p. At this time last year, they were trading for 726p, which is a 13% rise over a 12-month period. Since macroeconomic volatility began to impact many passive income stocks, Britvic has seen its shares pull back from 936p in May to current levels, which is an 11% drop.
The bull and bear case
Britvic has grown to become one of the premier drinks businesses in the world. Its brand power, position in the market, and profile are enviable. This has allowed the business to generate lots of income and boost shareholder returns over the years. The agreement with PepsiCo has been a real coup and arguably took the business to new heights.
Next, Britvic shares look good value for money to me right now on a price-to-earnings ratio of 14. In Britvic’s case, the shares aren’t cheap but I’m happy to buy quality shares at a fair price.
Moving on to Britvic’s passive income opportunity, its current dividend yield stands at 3.7%. There are higher yields out there, and I’m guilty of being tempted by them before. However, Britvic has a good record of increasing payouts, as well as the fact its dividend is well covered by earnings. I do understand that dividends are never guaranteed.
From a risk perspective, it’s worth noting that Britvic does have a fair bit of debt on its balance sheet. The issue is the high interest rate economy we find ourselves in. Higher rates mean that debt is costlier to service, which can have a detrimental impact on investor returns.
Another couple of issues that could hinder Britvic are rising costs and a cost-of-living crisis. The former could impact production and distribution costs, which could take a bite out of the profit margins that underpin payouts. In addition to this, wallet-conscious consumers may turn away from branded products towards cheaper, non-branded alternatives. I’ll be keeping a keen eye on Britvic’s trading updates in the near future to see if these issues have an impact.
A passive income stock I’d buy
Overall, there’s lots to like about Britvic, in my opinion. It has a great market position and profile and makes lots of money to support a solid investor rewards policy. At present, the shares look well priced for an excellent company to me. Plus, it has a good track record of performance, even though I’m conscious that past performance is not a guarantee of the future.
Taking everything into account, I’d be willing to buy Britvic shares for my holdings to boost my passive income when I next have some cash to invest.