As part of a diverse portfolio of holdings, I own specific stocks that help me make a passive income via dividend payments.
Smith & Nephew (LSE:SN) has an extraordinary dividend payment record. Recently, the shares have dipped. Should I add the cheapened shares to my holdings to make a passive income?
Smith & Nephew is a leading medical technology company with a presence in over 100 countries. It operates via three segments: orthopaedics, sports medicine and ENT, and advanced wound management.
As I write, Smith & Nephew shares are down 22% compared to this time last year. The shares are trading for 1,255p right now whereas, a year ago, they were trading for 1,613p.
The Covid-19 pandemic, stock market crash, and continued impact of the pandemic has hindered Smith & Nephew’s share price, in my opinion. A lot of its work is in elective surgeries. Due to the pandemic and stretched medical resources, elective surgeries were postponed as resources were dedicated to help assist with the pandemic. I believe the elective medical market is going to turn around. This should boost the Smith & Nephew share price and hopefully provide further returns and a passive income.
The obvious risk for Smith & Nephew’s fortunes in the immediate future is the continued impact of the pandemic. New variants of the virus have emerged since the pandemic began in 2020. These new variants have caused new restrictions, as well as macroeconomic issues, and even mini market crashes. If another variant were to occur, and hospitalisations were to increase, elective procedures could be halted once more. This could hamper the company’s performance and any passive income I hope to make.
Passive income seeker
There aren’t many shares on the FTSE index that can profess to paying a consistent dividend since 1937. Well, Smith & Nephew can do that. It even paid a dividend during 2020, throughout the market crash period. Many firms across the globe cancelled dividends during the pandemic and crash to conserve cash, but not Smith & Nephew. As I write, its current dividend yield stands at a respectable 2%.
I do understand that past performance is not a guarantee of the future, however. Dividends can be cancelled at any time, of course, which would affect any passive income. My bullish stance towards SN stems from recent and historic performance. After all, good performance leads to shareholder returns. Looking back, I can see revenue and operating profit increases year on year for three years prior to 2020. 2020 levels were not far behind 2019 pre-pandemic levels.
Coming up to date, a notice of results released yesterday confirmed full-year 2021 results were due on 22 February. A Q3 update in November mentioned pre-Covid momentum was returning operationally and financially.
With the continued vaccine rollout, better management of the pandemic, and an ageing population, the market is primed for Smith & Nephew to grow rapidly in the coming years. This should lead to good performance and more dividend payments.
Overall, I think the Smith & Nephew shares are a no-brainer for my passive income portfolio. The shares look cheap right now due to the recent dip. A good track record of performance and a fantastic dividend payment record fill me with confidence that the future could involve lucrative shareholder returns for my holdings. I would add the shares to my portfolio.
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Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Smith & Nephew. 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.
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