Yielding close to 4%, here’s one rock-solid passive income stock!

Sumayya Mansoor explains why she’s bullish on this passive income stock with its excellent fundamentals and solid yield.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young mixed-race woman jumping for joy in a park with confetti falling around her

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Britvic Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »

Investing Articles

Here’s a plan to target £7,500 a month in passive income

This writer outlines a roadmap that someone could consider taking to try and aim for a substantial future passive income…

Read more »

Young female hand showing five fingers.
Investing Articles

5 FTSE 250 stocks Fools are backing for promotion to the FTSE 100 this year

Can Vistry make an imminent return from the FTSE 250? One Fool thinks so -- read on to find out…

Read more »

Investing Articles

How much would an investor need in a Stocks and Shares ISA to earn a £1,000 monthly passive income?

Christopher Ruane digs into some details as to how an investor could use a Stocks and Shares ISA to enjoy…

Read more »