A high-yield stock I’d buy right now for dividend growth

Stodgy old businesses with little potential for dividend growth aren’t necessarily behind high-yielding stocks.

Sometimes companies can pay high yields and have a track record of dividend growth that looks set to continue. And I counted FTSE 250‘s Moneysupermarket.com (LSE: MONY) is one such company.

It’s a decent business

The company operates a price comparison site for insurance, money, home services, and other products. And that brand MoneySuperMarket, MoneySavingExpert, Quidco, Decision Techniques, Travel Supermarket and Ice lolly.

The company’s services will be familiar to many. And one interesting feature of the set-up is the way the business is constantly looking for new ways to grow. In his own words, the company has “A simple and scalable success-based revenue model.” And it works by MONY taking a fixed marketing fee from the product provider when the customer buys the product through one of the comparison websites.

This is a viable business judging by its multi-year record of shareholder dividend payments. In 2016, the company paid a total dividend for the year of 9.85p per share. And by 2023, City analysts predict it will pay around 12.1p per share.

Directors raise shareholder payouts slightly each year except for 2020 and 2021 when they remain flat. And that’s probably because of their consistent performance in revenue, earnings and cash flow over the years.

In October, the company reported strong results. The figures show revenue was up 24% in the nine months to 30 September 2022. The directors said third quarter performance was ahead of expectations, particularly in the Money category.

An optimistic view

And looking forward, chief executive Peter Duffy said the company’s strong brand was well placed to support consumers through the cost-of-living crisis. Indeed, when saving money is a priority, I think maybe more people will go to Moneysupermarket.com. And in that sense, the operation has the defensive qualities I look for when picking dividend stocks.

Meanwhile, with a share price close to 216p, the expected dividend yield is around 5.6% for 2023. And I think that’s interesting because there is potential for shareholder payouts to continue to grow in the years ahead.

The yield is high because of the weakness of the stock price. In 2019, the stock topped just above 400p. And in the last year, it was down about 20%. But it looks like the price may go back up.

However, there is no guarantee that stock prices will return to previous levels. And dividends may not continue to grow. It is even possible that the business is going down. In such a situation, I would lose money on the stock.

However, I would be inclined to bear the risk. And if I had spare funds to invest, I would have locked those returns into a diversified portfolio by buying some stocks.