The stock markets have been volatile in 2022. Right now, some calm has been restored. But inflation is still not entirely under control, interest rates are rising, and a recession is still a threat. I would not bet against a choppy 2023. So I am looking for dividend stocks to buy in 2022 and hold through 2023 and beyond.

Are income stocks a good buy?

When share prices fall, dividends offer some much-needed return in my portfolio. Since I am not yet drawing any income from my portfolio, I can reinvest any dividends I receive. If prices are falling, then whatever I reinvest will go further. So, I believe dividends, or income stocks, are a good buy for my portfolio.

I cannot buy any old dividend stock and hope for the best. I need a degree of safety. It would be a fruitless exercise to invest for income only to find a company cuts its payouts to shareholders. For that reason, high yields are not necessarily good picks. I prefer a share that offers a moderate yet more assured yield over a chunky but potentially risker one.

For safety, I usually look for dividend cover of more than 1.5 times earnings. That means for every pound of dividends paid, the company makes at least £1.50 in earnings. A company that has not cut its payouts to shareholders in the last five or ten years is also good. These features are essential because I am looking for potentially excellent long-term performance from my stock picks.

UK dividend stocks

FTSE 100 member National Grid offers a 5.14% yield and can boast 20+ years of consecutive dividend growth. It has a monopoly in its ownership of much of the UK’s electricity infrastructure. But, its profits are regulated, and its deals get scrutinized. For example, the recent disposal of its UK gas transmission has drawn the attention of the competition and markets authority. Nevertheless, this slow and steady company with a sustainable competitive advantage make it a solid long-term pick for the income component of my Stocks and Shares ISA.

Unilever shares yield 3.61%, and shareholders have not seen their payout cut in two decades. Its revenue was second only to Proctor & Gamble in the household and personal care space and L’Oreal in beauty products. Of the 25 leading fast-moving consumer goods brands globally, Unilever has eight entries, more than any other company. That’s a lot of recurring revenue sources. But, Unilever is not immune to inflation. Its input costs have soared, hurting margins. The company is also keen on acquisitions that have not always performed admirably. Yet, I still believe Unilver deserves its place in my ISA.

The dividend yield on British American Tobacco stock is 6.75%, and again has made continuous dividend payments since at least 2002. British American Tobacco faces a problem in that the number of cigarettes and cigars sold annually is declining. However, the value of the tobacco market is increasing, which is a testament to the power of nicotine addiction in allowing tobacco companies to keep increasing the price of their products. That might be unsustainable, but the company is moving into alternative nicotine products, a growth market. Although the company has a lot of debt to service, rates are rising, I continue to hold it in my portfolio.

The post 3 dividend stocks to buy and hold in 2022 appeared first on The Motley Fool UK.

More reading

• Should I buy the maker of Guinness for snowballing passive income?
• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?

James McCombie has positions in British American Tobacco, National Grid, and Unilever. The Motley Fool UK has recommended British American Tobacco and Unilever. 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.

A FTSE 100 company can be called a dividend aristocrat when it does two things:

1. Consistently pays a dividend to its shareholders
2. Annually increases the size of the payout

There is no requirement for high yields. I assume the market is forward-looking. Investors might have driven a stock price down because they see trouble is on the horizon for the company. But that will also drive the trailing dividend yield higher. Thus, I could buy a stock just for its high yield and walk straight into a dividend cut.

The yields on my three FTSE 100 dividend aristocrat picks might seem uninspiring. But bear in mind that I am looking for companies to buy and hold in my Stocks and Shares ISA for years. I am looking for a great track record to give me confidence that dividends will be consistent and grow over time.

FTSE 100 dividend aristocrats

The first of my picks is the industrial engineering company Spirax-Sarco (LSE: SPX). It has increased its dividend per share (DPS) every year over the last decade. Over the last five fiscal years, payouts to Spirax shareholders have increased by 12% per year.

Spirax’s revenues and earnings have grown solidly over the last decade, driving dividends steadily higher. The company’s dividend payout ratio (DPR) — DPS divided by earnings per share (EPS) — has remained fairly stable at around 45% over the last half-decade. That speaks to a consistent dividend policy designed to pay out what the company can afford. This is all comforting. It suggests that if the company continues to perform as it has, I should see bigger cash flows into my ISA over time if I buy its shares now.

Diageo is another FTSE 100 dividend aristocrat with solid revenue and earnings growth and a consistently increasing dividend over the last decade. Aside from a very high reading in 2020, the DPR has remained at around 60% over the last five years. The company, which produces alcoholic beverages known the world over, like Johnnie Walker and Smirnoff, has increased its DPS by 4% annually on average over the last five years.

Finally, I like the look of Relx. This provider of research journals, databases, business intelligence, analytics services, and exhibitions has consistently paid a dividend to its shareholders for decades and increased it yearly over the last 10 years. Once again, I see solid revenue and earnings growth and a consistent DPR of about 60%.

Attractive dividend yields

A high dividend yield might not necessarily be attractive. Also, a low yield might not mean an investor like myself should turn away in horror. None of these three stocks has eyewatering yields: Spirax’s yield is 1.3% on a trailing 12-month basis, Relx’s is 2.3%, and Diageo comes in at 2.1%.

But let’s look at DPS instead. Spirax shareholders received a dividend of 136p per share in 2021. If Spirax continues to grow its payments at 12% a year, then after 10 years, the DPS will be 350p, and after 20, 1,088p, which would be a yield of 10% on a 10,620p per share investment in the stock made today. But, as always, there are no guarantees in investing, and I need to be confident that the future of these companies will look like the past before diving in.

The post 3 FTSE 100 dividend aristocrats I’d buy and hold for years appeared first on The Motley Fool UK.

More reading

• Should I buy the maker of Guinness for snowballing passive income?
• £5,000 invested in a FTSE 100 index tracker 3 years ago is now worth…
• 1 ‘radioactive’ FTSE share that’s worth a second look
• Down 10% already this year, is there any hope for the Diageo share price?
• Are Diageo shares about to pull a Rolls-Royce?

James McCombie has positions in Diageo and RELX. The Motley Fool UK has recommended Diageo and RELX. 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.

2022 hasn’t been a good year for stock investing returns. Since January, the S&P 500 is down 25%, putting it firmly in bear market territory. The FTSE 100, on the other hand, has only fallen by 8%. However, some shares have fallen a lot further than that.

One sector that has taken a battering recently is insurance. In particular, I’ve been tracking two stocks I believe are in serious bargain territory.

Prudential

When it comes to growth stocks, the insurance sector doesn’t spring to mind. However, Prudential (LSE: PRU) is undoubtedly a growth business.

The company has reinvented itself lately. Its business model is now aligned solely to the long-term structural growth opportunities in Asia and Africa.

It offers a diversified suite of insurance products, including health and protection, which accounts for over a third of all new business profits.

Despite fast-rising prosperity, people in Asia still have low levels of insurance cover, with 39% of health and protection spend met by individuals directly. A large unmet need has created a vast health protection gap estimated at $1.8trn.

In the next 10 years, the size of the industry revenue pool across its core markets is expected to grow by $900bn. Translated to its Asia business, gross written premiums are projected to more than double in that time to over $60bn.

Of course, these are just estimates and there are no guarantees. At present, shareholders are more concerned with short-term headwinds. Rolling Covid restrictions in India, Malaysia and Singapore have dented margins. In Hong Kong, the closure of the border with Mainland China has resulted in overall annual premium equivalent (APE) in its largest market slump 10%.

Prudential’s share price is down 33% year-to-date. Yes, it could fall further. Nevertheless, I intend to buy its shares.

Legal & General

My second insurance stock pick is a traditional income one. Like Prudential, Legal & General (LSE: LGEN) has seen its share price plummet recently. It’s now down 29% year-to-date. This has had the effect of pushing up its forward dividend yield to 8.9%.

Normally, yields approaching 10% ring alarm bells. As a likely recession looms, dividend cuts can never be ruled out. However, I’m less concerned about L&G’s.

In the first half of 2022, it achieved 22% growth in cash generation and 14% growth in capital generation. The company remains confident in its ability to grow cash and capital faster than its dividend commitment.

This confidence is backed up by a number of growth drivers, including ageing demographics. As populations live longer, so too must their pensions. Organisations are increasingly turning to L&G to help them find solutions to their ongoing pension commitments. At the same time, individuals need to ensure that their retirement funds and other assets can finance longer retirements.

The accelerating share price sell-off is a direct result of the recent turmoil in the bond market. However, despite volatile markets, the group issued a press release to the effect that it hasn’t been forced to sell any gilts or bonds to shore up its capital position.

When markets are in turmoil, I always remember one of Warren Buffett’s classic quotes: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”. In L&G, I’m seeing such an opportunity and I’ll be buying.

The post As the FTSE 100 tanks, I’m hoovering up bargains appeared first on The Motley Fool UK.

More reading

• I put £1,125 into this ‘boring’ FTSE 100 stock for £99 in passive income
• How to invest £5,000 to target a £400.50 second income
• How much does an investor need in an ISA to target a £2,400 monthly passive income?
• How big would a Stocks and Shares ISA need to be to target a monthly income of £3,253?
• 3,703 Legal & General shares pay £822 yearly passive income

Andrew Mackie has positions in Legal & General Group. The Motley Fool UK has recommended Prudential. 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.

Abrdn (LSE:ABDN) shares have had a difficult year. The asset manager began 2022 buoyed by improving financials only to be hit by sky-high inflation and the worsening economic outlook of the UK. 

In the first half (H1) of 2022, the firm recorded a total pre-tax loss of £320m. Fee-based revenue dropped 8% to £696m and adjusted operating profits fell 28% to £115m. 

As a result, Abrdn shares are down 47% in 12 months and 42% so far in 2022.

This prompted a demotion from the FTSE 100 in September and the investment firm is now a part of the mid-cap FTSE 250 index. 

But things could be changing. Abrdn shares are up 8% in the last week. Could this beaten-down stock present a mixture of growth and value, factoring in this historic decline and the 10.7% dividend yield? Let’s find out. 

Cheap or a value trap?

Most shares that fall nearly 50% in a year will appear cheap on paper. Looking at the performance of Abrdn shares performance over time, it is clear that the firm has declined steadily since hitting an all-time high of 571p in 2015.

The company has undergone many changes over the last decade, including a merger and subsequent sale of the Standard Life business, several high-profile boardroom changes, and a rebranding effort.

Most investment firms are struggling at the moment. The larger economic collapse in the UK has caused trading volumes to drop. 

This marketwide pullback caused Abrdn’s assets under management (AUM) to fall £34bn in H1 2022. Despite this, the company has managed to hold on to its position as one of the largest asset managers in the UK. 

And I think the latest collapse in Abrdn shares is primarily due to current market conditions rather than a failing business model. This is why I still hold on to my opinion that it is a bargain right now.  

Positives and verdict

Abrdn has been a consistent dividend payer for over 15 years now. In July 2022, the company managed to roll out a share buyback worth £300m. The board also announced its plans to return £500m to shareholders after the firm was removed from the FTSE 100 last month. 

The firm has also changed how it uses excess cash. While many analysts questioned the acquisition of Interactive Investor for £1.5bn, the firm has also been shedding excesses to generate more cash. 

Heading into H2 2022, the investment firm sold two of its stakes in HDFC for about £500m. The company also sold £300m worth of Phoenix Group shares to fund the aforementioned share buyback program.  

This makes me optimistic that the company plans on maintaining a decent dividend going forward. While the current yield of 10% might be unsustainable given falling profits, I think the annual yield will remain higher than the FTSE 100 average of 3.5%. 

When the economy recovers, I expect large asset managers to recover quickly. Given its current sky-high yield and history of shareholder returns, I think Abrdn shares currently offer a nice mix of growth potential and value. I am wary of further economic turmoil in the UK, which is why I am looking at a £1,000 lump sum investment when conditions stabilise. 

The post Up 8% in a week! Can beaten-down Abrdn shares make a comeback?  appeared first on The Motley Fool UK.

More reading

• 4 FTSE 250 shares that could generate a 4-figure monthly second income
• How can I target £14,132 a year in dividend income from a £20,000 holding in this FTSE 250 dividend gem?

Suraj Radhakrishnan 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.

The FTSE 100 is falling fast and is at its lowest level in over 15 months. However, share buybacks by top Footsie companies are at all-time highs. Several industries are seeing record profits and will come out of this slump in a better financial position. 

I see this as the perfect opportunity to load up on some quality stock at great prices. And one firm looks like a good value pick to me.

DS Smith (LSE:SMDS) shares are currently trading at 267p. They have a price-to-earnings (P/E) ratio of 13.1 times and offer a dividend yield of 5.6%. This looks like a great bargain to me, and the company’s latest financial update has made investors very happy.

DS Smith shares could take off

Dividends stocks are under the spotlight right now. Chancellor Kwasi Kwarteng’s latest plans will see the tax on dividends lowered by 1.25%. This comes after share buybacks by UK firms hit a record of £16.2bn in the second quarter (Q2) of 2022. 

This shows that despite the turbulence in the market right now, investors who buy and hold quality shares will be rewarded. Returns from share price movements are low right now. But if I make smart decisions today and grow my passive income portfolio, I could benefit from higher payouts for decades.

This is where DS Smith shares look like a good option to me. The global packaging firm released a strong trading update this week. For the first half (H1) of 2022 (ended 31 October) operating profits are expected to be at least £400m, beating all previous estimates. To put this in perspective, total operating profits in FY2021 were £616m. 

This is great news for DH Smith’s dividend moving forward. The already sizeable yield could grow in the coming months if H2 performance meets expectations. Current full-year earnings projections will put year-on-year earnings growth at 10.9%.

After the update was released, DS Smith shares jumped over 12% in a day. But it is still trading 42% below its post-pandemic highs of 461p set in September 2021.

Concerns and verdict

With the FTSE 100 struggling to find stability, it is hard to say if this update alone could trigger a share price rise. In fact, the company posted decent results in line with expectations last year. However, its share price continued to fall. DS Smith shares are down over 30% in the last 12 months and 32% in 2022. 

Also, paper prices have remained high after the pandemic and are projected to rise over 2.5% annually for the next five years. DS Smith already has razor-thin margins. The e-commerce surge over the last 24 months has triggered a huge demand for packaging materials like cardboard. And rising paper pulp prices could put a strain on future revenue. 

However, I am optimistic that DS Smith can hit its new targets this year, which would increase investor interest. Given its size and global presence, I think the firm is well-placed to navigate rising raw material costs. I think DS Smith could offer a good mix of value and growth for my portfolio, which is why I am willing to invest if signs of recovery grow stronger. 

The post Are DS Smith shares the FTSE 100’s best bargain right now?  appeared first on The Motley Fool UK.

More reading

• Should I buy the maker of Guinness for snowballing passive income?
• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith. 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.

A dividend stock can boost my passive income stream through consistent dividend payments. One I purchased recently is Centamin (LSE:CEY). Here’s why.

Gold miner

As an introduction, Centamin is a gold mining business that focuses on assets in Africa. Its primary asset is the Sukari gold mine located in Egypt.

So what’s happening with Centamin shares currently? As I write, they’re trading for 86p. At this time last year, the stock was trading for 88p, which is a 2% drop over a 12-month period. In the last three months, Centamin shares are up 19% from 72p to current levels. This has netted me a small return to date.

Why I decided to buy this dividend stock

I weigh up the pros and cons of purchasing any stock after conducting thorough research and due diligence.

Looking at Centamin’s risks to start with, I noted that macroeconomic headwinds could hamper my position in the shares. For example, soaring inflation and the rising cost of materials can hinder any returns. Rising costs for any mining business are a concern as they can eat into profit margins. These same profits underpin returns.

As well as rising costs, Centamin shares could suffer at the hands of the reaction to soaring inflation. In times like this, central banks are raising interest rates in an effort to bring down inflation. This raises the price of the main currencies in the world, such as the US dollar. If this happens, the demand for and value of gold could fall.

Moving on to Centamin’s positives, the current volatility is one of the reasons I added the shares to my holdings. When inflation rises, commodities like gold are often seen as safer, defensive options. This is a trend seen throughout the world recently. Many investors have moved away from traditional stocks in sectors such as tech and finance, and move towards commodities.

Next, as a passive income seeker, I wanted an index-beating dividend stock, so sought out Centamin for returns and growth. At present, the dividend yield stands at 7.8%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9% respectively. I do understand that dividends are never guaranteed, however. In addition to this, the shares look good value for money on a price-to-earnings ratio of just nine currently.

Finally, I noticed that not only does Centamin have a good track record of performance, it has no debt on its books! No debt means more dividends for shareholders like me as well as money for growth initiatives. I am conscious that past performance is not a guarantee of the future, however. Looking back, I noticed that revenue and profit have grown each year for the past four years.

My verdict

I decided to buy Centamin shares for the passive income opportunity. I also wanted to diversify my portfolio with a commodity stock.

Although I don’t expect the current volatility to last forever, demand for gold, as well as Centamin’s fundamentals, including a strong balance sheet, were too good for me to ignore.

The post Here’s why I bought this dividend stock with its juicy 7%+ yield! appeared first on The Motley Fool UK.

More reading

• Should I buy the maker of Guinness for snowballing passive income?
• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?

Jabran Khan has positions in Centamin plc. 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.

One stock that has been on my watch list for some time now is Telecom Plus (LSE:TEP). I believe it has some defensive capabilities as a utilities provider. With this in mind, could it be a good dividend stock for me to add to my portfolio? Let’s take a closer look.

Utility provider

Telecom Plus, better known under its trading name of Utility Warehouse, is a telecommunications and utilities business that provides a number of services. These include mobile, internet, fixed-line, as well as gas and electricity services. Most of its revenue is generated from electricity services.

So what’s happening with Telecom shares currently? Well, as I write, they’re trading for 2,270p. At this time last year, the stock was trading for 1,206p. This is a 88% return over a 12-month period.

To buy or not to buy?

Let’s take a look at some of the pros and cons of me buying Telecom shares.

FOR: I believe Telecom has excellent defensive traits. The services it provides are mainly essential, especially electric and gas services for consumers to heat and power their homes. In addition to this, internet and telephone connectivity is also pretty much essential in this day and age too. This should help boost performance, as well as keeping returns consistent. Furthermore, Telecom has benefitted from many other firms going out of business due to current issues in the energy sector. It has boosted performance, and customer numbers as a result.

AGAINST: Market volatility is always something I am wary of. The geopolitical events in Russia have led to gas supplies being tightened, and increased demand from many countries to seek resources from different resources. This has led to a spike in prices. I can’t help but wonder if the market eventually normalises, could Telecom find performance and payouts slowing down?

FOR: At present, Telecom’s dividend yield stands at 2.5%. Furthermore, it has a great record of payouts, with the dividend not having been cut since 2006! A dividend stock with such a great record is not easy to find currently, especially after the recent economic volatility, and the pandemic, when many firms cut dividends to conserve cash.

AGAINST: Another concern of mine is the fact that long-time CEO Charles Wigoder stepped down from the business in July. Under his 23-year stewardship, the company experienced growth, consistent returns, and great success. Could his steady leadership be missed moving forward? Only time will tell.

A dividend stock I will continue to monitor

Taking everything into account, I’ve decided to keep Telecom Plus on my watch list for now and continue to monitor developments. I want to see how the new leadership fares in the coming months, as well as monitor the energy market as a whole. Answering my titular question, Telecom is a decent dividend stock, in my opinion. For me, a mixture of uncertainty in the market, the change in leadership, and an average yield put me off. Finally, I believe I can purchase better yielding stocks elsewhere to boost my holdings.

The post Could this defensive business be the ideal dividend stock? appeared first on The Motley Fool UK.

More reading

• A 9.1% forecast yield! 1 under-the-radar FTSE income share to buy today?
• 3 FTSE shares tipped to grow 100% (or more) in the next 12 months

Jabran Khan 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.

Boosting my passive income stream through dividend-paying stocks is a key part of my investment strategy. When considering any potential share to buy, I look at the yield on offer. I noticed that NextEnergy Solar Fund (LSE:NESF) currently offers a dividend yield of over 7%. Could it be a good dividend stock option for me to buy and hold?

Solar panel investment fund

As an introduction, NextEnergy is an investment fund that focuses on solar energy infrastructure assets. It owns a series of assets throughout the UK with a total energy generation of 865MW, as I write.

Solar energy has risen in prominence in recent years, like many other renewable energy options. This is because the planet battles climate change, and many governments are looking to cut harmful carbon emissions.

So what’s happening with NextEnergy shares currently? Well, as I write, they’re trading for 103p. At this time last year, the stock was trading for 94p. This is a 9% return over a 12-month period.

To buy or not to buy

So what are some of the pros and cons of me buying NextEnergy shares?

FOR: A major positive for me is the current renewable energy market as a whole, as well as NextEnergy’s growth to date. Renewable energy around the world is a burgeoning market as everyone races to create alternative fuel solutions, in line with increasing demand for electricity. NextEnergy has grown its estate consistently since it began. It has grown its output year on year for the past eight years. In addition to this, its costs remain largely fixed, which could help boost growth and shareholder returns.

AGAINST: As a real estate investment trust, NextEnergy must return 90% of profits to shareholders. The issue I have here is that it is using debt to finance growth. I am usually put off by debt so will keep a keen eye on its balance sheet.

FOR: As a potential dividend stock, NextEnergy’s yield looks solid right now. It has a track record of increasing its payout since 2015. This is important for me as I want to boost my holdings with stocks that pay regular and consistent dividends. In addition to this, the shares look cheap on a price-to-earnings ratio of just five currently.

AGAINST: As with any passive income stock, it is worth remembering that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This is usually to conserve cash in times of economic volatility or unexpected events.

A dividend stock I would buy

Reviewing all the information at hand, I do like the look of NextEnergy shares. I believe it could be a great stock to boost my passive income stream as it operates in a growth market. I am conscious of the risks involved too, however.

I would be happy to add NextEnergy shares to my holdings.

The post This renewable energy dividend stock yields 7%. Should I buy shares? appeared first on The Motley Fool UK.

More reading

• Should I buy the maker of Guinness for snowballing passive income?
• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?

Jabran Khan 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.

As part of ensuring my holdings are providing me with consistent returns, I look for dividend paying stocks to boost my passive income stream. One dividend stock I’m currently interested in is Land Securities Group (LSE:LAND). Let’s take a closer look at whether I should buy or avoid the shares.

Real estate investment trust (REIT)

Land Securities, often referred to as Landsec, is one of the largest REITs and property businesses in the UK. It buys, owns, operates, and rents out a number of different properties including retail, leisure, residential and office buildings. The income it yields from these properties is then paid back to shareholders in the form of dividends.

The beauty of REITs is that 90% of profits must be returned to shareholders. This is why I already a own a few as part of my holdings.

So what’s happening with Landsec shares currently? Well, as I write, they’re trading for 599p. At this time last year, the stock was trading for 666p, which is a decline of 10% over a 12-month period.

To buy or not to buy

I have compiled some pros and cons of me buying Landsec shares to help me decide what to do next.

FOR: I like the fact Landsec is one of the biggest operators in the UK. Through its £12bn portfolio, and 24m square foot operation, it has a diverse portfolio of property and covers lots of different geographical territories. I believe this diversity affords it some protection against challenges such as economic volatility.

AGAINST: Economic volatility is one of the biggest challenges I believe Landsec currently faces. Due to soaring inflation, a cost-of-living crisis has emerged in the UK. One concern I do have is that rent collection could become an issue, which would affect performance and returns. Furthermore, the changing face of retail due to the rise of e-commerce could see its retail outlets experience weaker demand. In addition to this, the working from home trend could impact demand for its office buildings.

FOR: At current levels, Landsec shares look decent value for money on a price-to-earnings ratio of just over five. Additionally, as with any dividend stock, I want to know the dividend yield, which would help me understand the level of return I could receive. Landsec’s dividend yield stands at 6.5%. This is higher than the FTSE 100 average of 3%-4%.

AGAINST: I am aware that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. Some reasons for this include economic volatility, a financial crash, or an unexpected event such as a pandemic. Dividends are usually cut to conserve cash.

A dividend stock I would buy

To summarise, I believe the positives outweigh the negatives when it comes to Landsec shares. Although I am unable to purchase every stock I like, I would be willing to add Landsec shares to my holdings to boost my portfolio. Its profile, presence, the dividend yield on offer, and current valuation all help me come to this conclusion.

The post Should I buy or avoid this dividend stock with its 6.5% yield? appeared first on The Motley Fool UK.

More reading

• What size ISA do you need for £250-a-week retirement income?
• Here’s how FTSE 100 dividends produce potent passive income
• With the potential to double in 10 years, this could be a dividend stock to consider buying
• Is this market correction a once-in-a-decade chance to buy ultra-high-yield income stocks?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. 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.

One dividend stock I’m considering adding to my holdings is Vistry Group (LSE:VTY). Could it help me boost my passive income stream through dividend payments? After all, this is a large part of my investment strategy. Let’s take a closer look to see if I should buy or avoid the shares.

Housebuilder

The name Vistry Group may not resonate as strongly as other housebuilders due to the fact the business was only formed under this name in 2020. It was created through the acquisition completed by Bovis Homes of Linden Homes. With over 13 regional business units, the firm has approximately 200 sites currently across the UK. It is one of the largest housebuilders in the UK.

So what’s happening with Vistry shares currently? Well, as I write, they’re trading for 792p. At this time last year, the stock was trading for 1,104p, which is a 28% decline over a 12-month period.

A dividend stock with risks

Firstly, the current economic climate could affect Vistry negatively. Soaring inflation, the rising cost of materials, as well as the supply chain crisis, won’t help. For example, rising costs could put pressure on profit margins. Next, supply chain issues could result in building and sales being delayed. All these issues could affect performance and returns.

Next, rising interest rates, to combat inflation, have made it harder for consumers to obtain a mortgage. This could result in a shorter-term decline in demand for properties as many may turn to the rental market instead. The current cost-of-living crisis could add to this too.

The bull case and my verdict

So to the bull case. Firstly, I’m buoyed by Vistry’s position in the market, as well as its profile and presence. In fact, in 2021, it was voted the largest housebuilder in the UK at the Housebuilder Awards. I believe it could leverage this size advantage into increased sales, performance, and eventually returns too.

Next, the housing market in the UK could benefit Vistry, and all other housebuilders, in the longer term. At present, demand for new homes is outstripping supply. This means new homes could be snapped up quickly, which could result in performance growth for Vistry, and dividends for shareholders.

For any dividend stock I want to know the level of return and I measure this by the dividend yield. Currently, this stands at 7.5%. This is significantly higher than the FTSE 250 average of 1.9%. I am conscious that dividends are never guaranteed, however. Furthermore, the shares look decent value for money right now on a price-to-earnings ratio of eight.

Finally, I can see that Vistry has a good track record of performance. I am aware that past performance is no guarantee of the future. However, looking back, I can see it has grown revenue and profit year on year since 2018.

To summarise, I expect Vistry shares to experience some headwinds in the short to medium term. Luckily, I invest for the long term. With that in mind, I believe Vistry could be a good dividend stock to buy for my holdings. Its profile, presence, passive income opportunity, as well as performance track record and current market conditions, help my investment case.

The post Should I buy this dividend stock with its 7%+ yield? appeared first on The Motley Fool UK.

More reading

• Is now a once-in-a-decade opportunity to buy Vistry shares?
• With share prices rising, is now the time to hold off buying stocks?
• Are 76% off Vistry shares a once-in-a-decade opportunity?

Jabran Khan 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.