When evaluating any dividend stock, it is simple to be tempted in by a high yield. But that doesn’t always imply it would be the very best choice to improve my passive earnings stream. I’m more thinking about shares that pay a routine dividend, and have prospective to grow this regularly.
With that in mind, one choice I like for my holdings presently is Cranswick (LSE: CWK). Here’s why.
Food manufacturer
Cranswick is a British provider of premium, fresh, and added-value food. These consist of poultry, pork, meats, cheese, pasta, family pet food, and a lot more.
As I compose, Cranswick shares are trading for 3,270p. At this time in 2015, they were trading for 3,238p, which is a little increase of simply under 1% over a 12-month duration.
A dividend stock with fantastic basics and potential customers
Firstly, I think that Cranswick has protective characteristics as it runs in the food sector. After all, no matter the financial outlook, individuals require to consume. In addition to this, it has a varied set of operations through the wide range of food packs it produces and the channels it offers to too.
Next, Cranswick has a good record of performance and growth. I can see it has grown revenue and profit for the past four years in a row. This in turn should mean it can increase its payout, which is ideal for any dividend stock I am considering for my holdings.
Moving on, Cranswick’s current dividend yield stands at 2.5%. This is not the highest out there but I’m more interested in consistent dividend growth. Cranswick ticks this box for me too. It has an annual growth rate of approximately 8% and has increased its dividend each year since before the pandemic period. City analysts reckon earnings and dividends are only heading upwards. However, I do understand that past performance is not a guarantee of the future and dividends are paid at the discretion of the business.
Risks to note and my verdict
Despite my bullish stance on Cranswick shares, the current economic outlook is a risk to bear in mind. A cost-of-living crisis has emerged due to soaring inflation and rising interest rates. One of the hot topics has been the increase in food prices. Cranswick’s products are known to be on the premium side. A potential drop-off in sales could impact earnings and returns if consumers look for cheaper alternatives.
Linked to inflationary pressures, Cranswick could also see its production costs rise, which would eat into profit margins. These profit margins underpin shareholder returns.
Overall I believe Cranswick is a good dividend stock for my holdings at present. If I had some spare cash to invest, I would buy some shares.
Cranswick has a great record of performance and paying dividends. I do expect some headwinds in the short-term due to the current macroeconomic environment, mainly inflationary pressures. However, my investment strategy has always been to buy shares with a view to holding them for the longer term. With that in mind, I expect Cranswick to boost my passive income nicely for some years ahead.
The post With just a 2% payout, here’s why I rate this dividend stock highly! appeared first on The Motley Fool UK.
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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 varied series of insights makes us better investors.
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