I think Clarkson (LSE: CKN) is a great UK share for boosting an investor’s passive income. Here’s why I’d buy the dividend stock right now.
Profits boosted
Shipping businesses like this could face challenging conditions as the global economy cools. Lower levels of sea freight mean that the profits this firm makes from its shipbroking and maritime financial services operations could sink.
Having said that, I’m encouraged by how strong trading at Clarkson has remained despite worsening economic indicators. Indeed, such resilience has driven the firm’s share price skywards in recent sessions.
Last week, it announced that “performance has been strong across all divisions”, noting that trading has been particularly robust at its core broking division.
In fact, the FTSE 250 firm said that it now expects full-year profits to be “materially” ahead of prior expectations.
Ships shortage
Clarkson is thriving thanks to huge supply and demand imbalances in the shipping industry. Weak shipbuilding activity over the past decade has created a massive shortage of vessels of all types. And this is pushing shipbroking rates through the roof.
Pleasingly for the firm, there is little sign that this chronic shortage is set to end. Order books among shipbuilders have leapt, thanks to the post-pandemic economic boom. But this is doing little to soothe the world’s huge ships shortage.
According to industry analyst Lloyd’s List, a large containership ordered today will take between 30-36 months to build. That compares with half that time just two years ago.
A growing shortage of skilled manual labour is exacerbating the ongoing supply crunch. And, what’s more, the onset of new economic stress could worsen the problem by reducing new ship orders.
A dividend aristocrat
Against this backdrop, City analysts expect it to continue growing profits. A bottom-line rise of 23% is predicted for 2022. And, as a result, they predict that the dividend aristocrat will continue lifting its annual dividend too.
The shipping colossus has raised the full-year dividend every year for almost two decades. Forecasters think it will rise to 89.6p per share in 2022, from 84p last time out. This results in a decent 2.6% dividend yield.
Encouragingly, the numbers suggest it’s in great shape to meet City dividend estimates too.
The payout is covered 2.3 times by anticipated earnings, above the security benchmark of 2 times. Clarkson also has a strong balance sheet to fall back on if need be. Its free cash resources stood at an impressive £92.3m as of December.
A top buy
Dividend investing is about more than just picking income stocks with big yields. The key to enjoying a passive income is to buy shares that can increase dividends year after year.
Clarkson has proven to be one of the best stocks to buy for dividend growth for many years. And by the looks of things, it should continue to be a top income share for a long time to come.