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I am constantly looking for quality dividend stocks that will grow my steady stream of income. I own several REITs that do this. Another one that fits the bill for my portfolio. Civitas Social Housing (LSE:CSH) This is why I decided to buy shares for my holdings.
Civitas is a real estate investment trust focused on providing social housing across the UK. To provide more context, REITs are businesses established specifically to provide returns to shareholders from income-producing assets. Others have my own focus on warehouse or industrial property, or retail and office space. I like these stocks because as a rule, 90% of the profit should be returned to the investors.
Civitas shares trade for 64p at the time of writing. A year ago, the stock was trading for 84p, a 23% drop in the 12-month period. I’m not worried about this fall in share prices as many UK stocks have recently been hit by economic volatility. It means the stocks are cheap to buy now.
Why did I decide to buy stocks?
Firstly, I believe Civitas will only continue to grow as a business, as demand for housing outstrips supply here in the UK. Homebuilders are looking to take advantage of this. With this in mind, Civitas should be able to channel this demand into new homes and in turn generate more rental income. This will bring more profit to the investors.
Looking at the returns over that period, I think Civitas’ current dividend yield of over 8% is attractive. Comparing this level with the current one FTSE 100 An average of 3%-4% fills me with confidence. I understand that dividends are not guaranteed and may be withdrawn at any time.
Next, with Civitas shares falling, they now appear to be better value for money. They currently trade at a price-to-earnings ratio of 10. A general rule of thumb is that a ratio below 15 represents value for money.
Finally, I can see that Civitas has a good performance track record in recent years. For example, for the past four years, revenue has been growing year on year. But I know that past performance is no guarantee for the future.
Risks and conclusions
Even if I do decide to buy Civitas shares, I have to be careful of any potential non-revenue issues that I’m trying to do. Due to the current economic instability, a cost of living crisis has emerged. With this in mind, collecting rent can be difficult for Civitas. If this happens, it can affect your balance sheet and rate of return. But I believe this is a short-term issue.
Overall, I decided to add Civitas shares to my holdings based on the earnings potential, the growing market and share price, and the company’s history to date. I will be adding stocks to my holdings soon and expect them to grow my portfolio over the long term.