One stock that has been on my watch list for some time now is Telecom Plus (LSE:TEP). I believe it has some defensive capabilities as a utilities provider. With this in mind, could it be a good dividend stock for me to add to my portfolio? Let’s take a closer look.
Telecom Plus, better known under its trading name of Utility Warehouse, is a telecommunications and utilities business that provides a number of services. These include mobile, internet, fixed-line, as well as gas and electricity services. Most of its revenue is generated from electricity services.
So what’s happening with Telecom shares currently? Well, as I write, they’re trading for 2,270p. At this time last year, the stock was trading for 1,206p. This is a 88% return over a 12-month period.
To buy or not to buy?
Let’s take a look at some of the pros and cons of me buying Telecom shares.
FOR: I believe Telecom has excellent defensive traits. The services it provides are mainly essential, especially electric and gas services for consumers to heat and power their homes. In addition to this, internet and telephone connectivity is also pretty much essential in this day and age too. This should help boost performance, as well as keeping returns consistent. Furthermore, Telecom has benefitted from many other firms going out of business due to current issues in the energy sector. It has boosted performance, and customer numbers as a result.
AGAINST: Market volatility is always something I am wary of. The geopolitical events in Russia have led to gas supplies being tightened, and increased demand from many countries to seek resources from different resources. This has led to a spike in prices. I can’t help but wonder if the market eventually normalises, could Telecom find performance and payouts slowing down?
FOR: At present, Telecom’s dividend yield stands at 2.5%. Furthermore, it has a great record of payouts, with the dividend not having been cut since 2006! A dividend stock with such a great record is not easy to find currently, especially after the recent economic volatility, and the pandemic, when many firms cut dividends to conserve cash.
AGAINST: Another concern of mine is the fact that long-time CEO Charles Wigoder stepped down from the business in July. Under his 23-year stewardship, the company experienced growth, consistent returns, and great success. Could his steady leadership be missed moving forward? Only time will tell.
A dividend stock I will continue to monitor
Taking everything into account, I’ve decided to keep Telecom Plus on my watch list for now and continue to monitor developments. I want to see how the new leadership fares in the coming months, as well as monitor the energy market as a whole. Answering my titular question, Telecom is a decent dividend stock, in my opinion. For me, a mixture of uncertainty in the market, the change in leadership, and an average yield put me off. Finally, I believe I can purchase better yielding stocks elsewhere to boost my holdings.
The post Could this defensive business be the ideal dividend stock? appeared first on The Motley Fool UK.
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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.