I’m sure there are many like me who are always looking for new ways to make income. Inflation may be moving lower, but that does not mean that the cost of living crisis has disappeared. By finding good stocks with above-average returns, I can create a useful source of extra money.
Specialized manager
One idea that caught my attention last week was CVC income and growth (LSE: CVCG). It is an investment institution listed on the stock market. What this means is that the CVC (private equity and debt manager) manages the fund and invests the money. The value of the portfolio at any given time is referred to as the net asset value (NAV) of the company. As a result, the stock price should closely reflect movements in net asset value, over time.
As a dividend investor, these funds can be a great source of income. The reason is that unlike traditional corporations, a CVC’s focus is on generating income for shareholders only while aiming to increase the value of the trust over time.
The company has a strong track record, with a current dividend yield of 9%. They generate funds by providing loans and other forms of credit to private companies. Given that some of these companies may struggle to obtain traditional loans from major banks, the interest rates charged can be very high.
It’s focused on Europe, so doesn’t try to over-target obscure investment opportunities in other, more distant parts of the world.
Growth from here
The stock’s 12% rise over the past year impresses me. It currently matches NAV, so I don’t see it as overvalued. Looking forward, I am optimistic about how earnings confidence will continue.
Unlike some trusts that focus solely on stocks and have a heavy weighting in technology, this trust has truly diversified sector exposure. The largest sectors are Healthcare and Beverage and Food, both with a 17% allocation. In fact, the technology weight is only 3% at the moment. Based on my view of sectors that could outperform over the next year, this is positive.
One risk that people can be aware of is that debt trading is a dangerous business. If a CVC is involved with a company that defaults, that’s very bad news. I accept this as a risk, but counter it with the fact that he deals mostly in high-grade secured loans. This means that there is some form of collateral attached to the loans (such as business assets). So, in the event of a default, there seems to be nothing left to claim.
Taking things together, I think this is a positive option for investors to consider, including income. I’m looking forward to purchasing it when I have some free cash.
the post I’m an income seeker, and this dividend stock with a 9% yield looks interesting appeared first on Motley Fool UK.
Further reading
John Smith has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we provide in our subscription services such as Share Advisor, Hidden Wins and Pro. Here at The Motley Fool, we believe that considering a variety of ideas makes… We have the best investors.
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