When reviewing any dividend stock, it is easy to be lured in by a high yield. But that doesn’t necessarily mean it would be the best option to boost my passive income stream. I’m more interested in shares that pay a regular dividend, and have potential to grow this consistently.
With that in mind, one option I like for my holdings currently is Cranswick (LSE: CWK). Here’s why.
Cranswick is a British supplier of premium, fresh, and added-value food products. These include poultry, pork, meats, cheese, pasta, pet food, and much more.
As I write, Cranswick shares are trading for 3,270p. At this time last year, they were trading for 3,238p, which is a small rise of just under 1% over a 12-month period.
A dividend stock with great fundamentals and prospects
Firstly, I believe that Cranswick has defensive attributes as it operates in the food sector. After all, no matter the economic outlook, people need to eat. In addition to this, it has a diverse set of operations through the multitude of food stuffs it produces and the channels it sells to as well.
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.