5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the next phase of her life.

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One dividend stock I reckon could help boost my retirement fund is Telecom Plus (LSE: TEP). Let’s take a closer look at why!

One-stop shop for utilities

Telecom offers consumers the ability to wrap all their main utilities such as energy, phone, and insurance, into one account. I’ll be honest, I get frustrated at managing different accounts and payments for different things in my life. I imagine others do, too, so this looks appealing.

The shares are down 17% over a 12-month period from 1,976p at this time last year, to current levels of 1,624p.

The pros and cons

Telecom shares dropping has offered me a better entry point. They currently trade on a price-to-earnings ratio of 18. This isn’t the cheapest, but I have no qualms paying a fair price for a solid company.

Next, it’s hard for me to ignore Telecom’s growth and performance track record in years gone by. The business has recorded excellent year-on-year growth in recent years, and analysts tip this to continue. However, I’m conscious that past performance isn’t a guarantee of the future. Plus, forecasts don’t always come to fruition.

A big reason for Telecom’s success is its stellar reputation for customer service, as well as its unique selling point of offering a one-stop shop.

Moving on, a dividend yield of 5% is very attractive. Furthermore, the business looks like it can sustain this with a healthy-looking balance sheet. Looking back, the business has increased its payouts for the past 15 years, which is a great feat.

Looking at some bearish aspects, Telecom’s selling model is a worry for me. Think of door-to-door salespeople and individuals attempting to take you away from your daily life when walking down the high street to sell you something. It has been a great success for the firm to date. However, I’ve read many stories of mis-selling practices in regards to other firms that have led to hefty fines. Changing regulation could put the brakes on this type of modus operandi, which could hurt Telecom seeing as it has worked so well.

A more general concern is the current volatility, and heightened competition in the utilities market. I’m the first to admit I love a bargain. I’ll happily have two or three separate accounts for different things if it saves me some money. With the cost-of-living crisis, and so much competition out there, perhaps the ease of one account may not be as much of a draw to everyone as in the years gone by?

Wrapping up

Dividend-paying stocks come in all shapes and sizes. Telecom looks like a good fit for me and my aims with its attractive level of return, track record, as well as defensive ability. This stems from the fact that a lot of its products are essentials, including energy, and insurance.

I’d be willing to buy some shares the next time I can to help beef up my retirement fund.

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 no position in any of the shares mentioned. 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.

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