This dividend stock has an enticing yield and defensive traits!


Cute senior couple in aprons dancing and smiling while preparing healthy dinner at home

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I am looking for stocks to increase my passive income stream through dividend payments. One dividend stock that I believe can do just that is REIT Health Impact (LSE:IHR). This is why I am considering adding shares to my holdings.

Health care property

As a brief introduction, Impact is a real estate investment trust (REIT) focused on healthcare properties and assets. This mainly deals with nursing homes that are bought and rented on a long term basis.

As a reminder, REITs are business arrangements to make money off of income-generating properties. As a rule, 90% of profits must be returned to shareholders as dividends. I already have a number of REITs as part of my holdings.

So what’s going on with Impact’s stock right now? Well, as I write, they trade for 118p. At this time last year, the stock was trading for 112p, which is a 5% return over a 12 month period.

Dividend stock with risk

Impact sharing does have risks, which I have to be aware of. As with dividend stocks, dividends are never guaranteed and can be canceled at the discretion of the business at any time. This can happen for several reasons such as poor performance as well as extreme events such as the pandemic in 2020 or a financial crisis such as in 2008. Dividends can be deducted during savings to save money.

Furthermore, the healthcare market, and the profits that will be generated by companies like Impact, could be affected in the years to come due to the upcoming social care reforms mandated by the UK government. These reforms could limit how many people are charged for maintenance and could materially impact the maintenance business, and property owners like Impact.

Why I love sharing Impact

So let’s talk about the positives. First, I believe Impact has a defensive nature. This is because health care is an essential service that everyone needs regardless of economic circumstances or other macroeconomic factors. Additionally, the aging population here in the UK could see a significant increase in the use of home care in the years to come. This will benefit Impact and could make it a smart dividend stock to buy now for future returns as well.

I believe Impact is preparing for future growth as I see it acquire a portfolio of 15 nursing homes in Scotland and Northern Ireland in December 2021. The total deal is worth £52m. These new properties can help sustain future growth in performance and shareholder returns.

So what about Impact’s recent performance? I understand that past performance is not a guarantee of the future. Looking back, I can see it has increased revenues and profits for the last four years in a row.

For each dividend stock I consider, I want to know the current dividend yield. Impact’s current yield stands at an attractive 6%. It’s higher than FTSE 100 an average of 3%-4%. In addition, the stock price looks good with a price-to-earnings ratio of 12.

Overall I believe the Impact Healthcare REIT can be a good dividend stock to buy for consistent returns and growth. I will add shares to my holdings.