Stodgy old businesses with little potential for dividend growth aren’t always behind high-yield stocks.
Sometimes a company can be paying a high yield and have a record of dividend progression that looks set to continue. And I reckon the FTSE 250‘s Moneysupermarket.com (LSE: MONY) is one such enterprise.
It’s a decent business
The firm operates price comparison sites for insurance, money, home services, and other products. And its brands are MoneySuperMarket, MoneySavingExpert, Quidco, Decision Tech, TravelSupermarket and Icelolly.
The firm’s services will be familiar to many. And one attractive feature of the set-up is the way the business keeps looking for new ways to grow. In its own words, the company has “a simple, success-based revenue model which is highly scalable.” And it works by MONY taking a fixed marketing fee from product providers when customers buy the product via one of the comparison websites.
It’s a decent business judging by the multi-year record for shareholder dividend payments. In 2016, the company paid a total dividend for the year of 9.85p per share. And in 2023, City analysts predict it will likely pay around 12.1p per share.
The directors raised the shareholder payment a little each year apart from 2020 and 2021 when it remained flat. And that’s been possible because of a steady performance in revenue, earnings and cash flow over the years.
In October, the company reported a robust set of results. The figures showed revenue up by 24% for the nine months to 30 September 2022. The directors said the third-quarter performance was ahead of expectations, particularly in the Money category.
An optimistic outlook
And looking ahead, chief executive Peter Duffy said the company’s strong brands left it well placed to support consumers through the cost-of-living crisis. Indeed, when saving money is a priority, I reckon it’s possible even more people may turn to Moneysupermarket.com. And in that sense, operations have the defensive qualities I look for when choosing dividend stocks.
Meanwhile, with the share price near 216p, the forward-looking dividend yield is around 5.6% for 2023. And I think that’s attractive given the ongoing potential for the shareholder payment to keep growing in the years ahead.
The yield is as high as it is because of share-price weakness. In 2019, the stock peaked just above 400p. And over the past year, it’s declined by around 20%. But it looks like the price may be turning back up.
However, there are no guarantees that the share price will return to former levels. And the dividend may not continue to grow. It’s even possible for the business to go into decline. Under conditions like those, I’d likely lose money on the shares.
Nevertheless, I’d be inclined to take on the risks. And if I had spare funds to invest would be keen to lock that yield into my diversified portfolio by buying some of the shares.
