When seeking passive income from shareholder dividends, it’s a good idea to diversify between several stocks.
However, the reality for me is that spare cash becomes available in relatively small chunks — not enough to buy more than one position. So choosing one stock for 100% of my investable money is commonplace.
The rest of my existing portfolio is diversified over several names. But I still choose the one stock each time as if it is the only investment I’m ever allowed to make. So I select it with care and after thorough research.
Strong brands and consistent cash inflow
I think that kind of focus is a good mind-state for investing. Every move deserves full attention and thought — more like being a sniper with a rifle than a farmer with a blunderbuss.
Right now, the stock attracting my attention for passive income is MONY (LSE: MONY), the money saving and personal finance services provider.
I’ve liked the FTSE 250 business for some time. It has some great brands, such as MoneySuperMarket and MoneySavingExpert, among others. Most will know of the company’s comparison websites. Personally, they help me keep my expenses within budget when shopping for energy, insurance and other services.
But what I like most about the business is its long, multi-year record of consistent incoming cash flow and gently rising shareholder dividends.
However, the share price has been on the slide, even though City analysts’ forecasts for earnings are robust for this year and next. Perhaps that’s due to general economic uncertainties as well as a decline in earnings from the firm’s activities in the energy space. But whatever the reasons, I sense an opportunity to focus on the stock now.
As I write on 23 October, the share price is at 195p. At that level the forward-looking dividend yield is above 6.7% for 2025.
At first glance, that valuation looks attractive, and a yield like that could be a good boost to a passive income portfolio for me. By comparison, the anticipated yield of the FTSE All-Share index is just 3.7%, or so.
Strong earnings ahead
Is the shareholder payment sustainable though? One of the risks is that competition from other players may increase over the coming years. Another is that service providers such as insurance companies may stop working with MONY.
Nevertheless, October’s third-quarter trading update contains an upbeat outlook statement despite that weakness from the firm’s energy offering.
The directors are confident the business will meet full-year expectations for 2024. According to City analysts, that means normalised earnings will likely increase by about 26%.
MONY tries to protect its niche in the market by applying technology to its activities and trialling new products from time to time. So far, I’d say the strategy’s been working and the multi-year financial and trading record’s impressive.
I’m fully invested at the moment. But MONY is at the top of my watchlist and is ripe for further research. I’d consider the stock as a purchase for passive income with the aim of holding it for at least five years.
The post I’d consider putting 100% of my money in this stock for passive income appeared first on The Motley Fool UK.
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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Mony Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
