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I am looking to strengthen my holdings in stocks that pay regular and consistent dividends. An income stream is one that can do this. Crest Nicholson (LSE:CRST) Should I Buy or Avoid Shares?
As a quick introduction, Crest is a property development business. He mainly focuses his work in and around London. It builds and sells properties such as single-family homes, apartment complexes, and more.
So what’s going on with Crest shares right now? Well, as I write, they are trading at 224p. This time last year, the stock was trading for 378p, a 40% drop in the 12-month period. Many stocks have come under pressure due to macroeconomic headaches and the tragic events in Ukraine.
Income accumulation with risks to consider
Rising inflation, rising material costs and a global supply chain crisis could cause crest issues. As costs increase, profit margins are pressured. If prices are increased, Crest risks losing customers.
Supply chain issues may affect operations, including the completion of assets for sale. Finally, the Bank of England (BoE) increased the base interest rate to combat rising inflation. The issue here is that this makes the loan more expensive for consumers. This could also affect demand for Crest.
Another risk to be aware of is that dividends are never guaranteed. I have to keep this in mind when considering any stock for dividend income. Dividends may be canceled at any time. This is more likely to happen in times of economic volatility, like now, when companies need to conserve cash.
The positives and what I do now
So to the positive, then. I like Crest’s business model to focus its operations in the south of England. This is because property prices are typically higher in this region. This means that it is in a position to sell at a high price and make a high profit. This can support performance growth and returns.
Next, there is a serious housing shortage in the UK. As demand exceeds supply, Crest should be able to use this increased demand to increase its performance and rate of return.
As with any income investment, I want to understand the rate of return I will receive. I look at profit margins to learn this. Currently, Crest shares are yielding 6.6 percent. This is more than three times FTSE 250 Average 1.9%
While I know past performance is no guarantee of the future, I am comfortable with Crest’s latest marketing update. The report for the half year ended April 30 was released in June. It confirmed that the revenue is more than 12 percent higher compared to the same period last year. In addition, profit, home completion, units sold and net cash also increased. An interim dividend of 5.5p was declared.
In conclusion, I like Crest Nicholson shares. Now I am not worried about the volatility in the market and the falling share price. In fact, this makes stocks more attractive. I add stocks to my holdings as income stocks to increase my holdings for the long term.