Boosting my passive income stream through dividend-paying stocks is a key part of my investment strategy. When considering any potential share to buy, I look at the yield on offer. I noticed that NextEnergy Solar Fund (LSE:NESF) currently offers a dividend yield of over 7%. Could it be a good dividend stock option for me to buy and hold?
Solar panel investment fund
As an introduction, NextEnergy is an investment fund that focuses on solar energy infrastructure assets. It owns a series of assets throughout the UK with a total energy generation of 865MW, as I write.
Solar energy has risen in prominence in recent years, like many other renewable energy options. This is because the planet battles climate change, and many governments are looking to cut harmful carbon emissions.
So what’s happening with NextEnergy shares currently? Well, as I write, they’re trading for 103p. At this time last year, the stock was trading for 94p. This is a 9% return over a 12-month period.
To buy or not to buy
So what are some of the pros and cons of me buying NextEnergy shares?
FOR: A major positive for me is the current renewable energy market as a whole, as well as NextEnergy’s growth to date. Renewable energy around the world is a burgeoning market as everyone races to create alternative fuel solutions, in line with increasing demand for electricity. NextEnergy has grown its estate consistently since it began. It has grown its output year on year for the past eight years. In addition to this, its costs remain largely fixed, which could help boost growth and shareholder returns.
AGAINST: As a real estate investment trust, NextEnergy must return 90% of profits to shareholders. The issue I have here is that it is using debt to finance growth. I am usually put off by debt so will keep a keen eye on its balance sheet.
FOR: As a potential dividend stock, NextEnergy’s yield looks solid right now. It has a track record of increasing its payout since 2015. This is important for me as I want to boost my holdings with stocks that pay regular and consistent dividends. In addition to this, the shares look cheap on a price-to-earnings ratio of just five currently.
AGAINST: As with any passive income stock, it is worth remembering that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This is usually to conserve cash in times of economic volatility or unexpected events.
A dividend stock I would buy
Reviewing all the information at hand, I do like the look of NextEnergy shares. I believe it could be a great stock to boost my passive income stream as it operates in a growth market. I am conscious of the risks involved too, however.
I would be happy to add NextEnergy shares to my holdings.
