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.