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One dividend stock I’m considering for my holdings is Bunzl (LSE: BNZL). Let’s take a closer look to help me decide whether I should buy or avoid the stock.
Distribution and subcontracting
Bunzl is a distribution and outsourcing company. Provides a one-stop shop in 30 countries supplying disposable plastic and paper packaging supplies to a variety of market sectors. These include retailers, food processors, wholesalers, convenience stores and more.
As I write, Bunzl shares are trading at 2,853 pence. This time last year, they were trading at 2,714 pence, up 4% over a 12-month period. It is worth noting that the shares have fallen 11% from the 2023 highs of 3,225p in April due to macroeconomic issues.
A dividend stock with a great track record but also risks
You would be hard-pressed to find many stocks around the world. FTSE index that has increased its annual payout to shareholders for 30 consecutive years. Well, Bunzl has done just that. While I understand that past performance is no guarantee of the future, a record like this cannot be ignored when reviewing investment viability.
In my opinion, Bunzl’s current business model is enviable. I have divided it into two fronts. First of all, many of their products are essential. It provides items such as rubber gloves to the medical industry and packaging to the food industry. Regardless of the economic outlook, these things offer Bunzl an element of defensiveness. Additionally, the business is excellent at generating cash. This is what has supported its exceptional dividend policy in recent years. With their global presence and fantastic track record, this seems like a potential opportunity to me.
Currently, Bunzl’s dividend yield stands at just over 2%. Higher yields exist, but I’m more interested in a dividend stock that can provide me with consistent, stable returns rather than high yields with an occasional payout. Of course, it’s worth noting that dividends are never guaranteed.
Moving on to the bearish case, Bunzl could be affected by the recent macroeconomic problems. First, supply chain problems could prevent you from offering your products to your customers. This may affect performance and payments.
Another problem is skyrocketing inflation and rising costs. When costs rise this can impact profit margins that underpin payments and growth aspirations, including acquisitions, something Bunzl does well to grow its profile and improve its offering.
my verdict
For me, the bullish scenario far outweighs the bearish scenario. Bunzl has an excellent position and profile in the market. Add to that its exceptional performance and payment history, and it looks like a good stock to buy for passive income purposes.
Even though it might face some short-term headwinds right now, I’d gladly add Bunzl shares to my holdings the next time I have some cash to invest. It looks like a great dividend stock to buy and hold long term for me and my holdings.
