The Stocks and Shares ISA deadline is fast approaching, and after April 5, any remaining ISA allowance will be lost. So to take advantage of the tax benefits, I must invest my spare capital before then. But the question is, where do I invest it? Fortunately, I’ve spotted one stock that looks like it could be an excellent source of reliable and consistent passive income. Let’s take a look.
Passive income for my Stocks and Shares ISA
When searching for dividend stocks, I always look at their track records to see whether the payments have been reliable. After all, there is no point in buying shares of a high-yielding business if that dividend is likely to be cut later.
This is how I stumbled across Devro (LSE:DVO). The company manufactures and sells collagen sausage casings. As unglamorous and boring as that sounds, it has proven to be an incredibly resilient business.
The pandemic created a challenging operating environment, and Devro’s Chinese facilities suffered continual disruptions. Yet despite this, the total revenue for the year only fell by 1%. And upon closer inspection, this drop appears to be linked to a slight decline in sausage prices rather than any problems with production volumes.
Devro is by no means a growth stock. But it’s certainly been acting like one lately. Over the last 12 months, the share price has increased by nearly 50%, rising far higher than its pre-pandemic levels. Combining that with an average annual 8% growth in dividends over the last 20 years makes Devro look like an excellent candidate for my Stocks and Shares ISA.
Risks to consider
Collagen is the primary ingredient in all of Devro’s products. It has established long-term contracts with specialised suppliers. But it is still exposed to potential supply chain disruptions and price fluctuations. The ingredient currently represents around 20% of the firm’s operating expenses. Therefore even small increases in price could have a significant impact on profit margins.
The firm also has to comply with food and safety regulations across multiple countries. These are in place to protect the health of Devro’s customers. But any changes could result in restricted product movement between territories and introduce complications to the manufacturing process. If the company cannot keep up with changing standards or accidentally breaches them, it could lead to competitors taking advantage and stealing market share.
The bottom line
Despite the rising share price, Devro still offers an attractive 4.6% dividend yield to its investors. That looks particularly enticing to me for my passive income portfolio, especially since the firm hasn’t cut or suspended any payments in over 20 years.
With the 2021 dividend already declared, and the demand for sausages not disappearing any time soon, I’m definitely considering adding the company to my Stocks and Shares ISA before the new tax year.