Is this 14% yielding dividend share too good to miss?

Is this 14% dividend stock too good to pass up?

One potential dividend stock that caught my eye is Diversified Energy Company Should I buy this stock for my holdings to increase my passive income? Let's take a closer look.

Energy wells

Diversified is an independent owner and operator of natural gas and oil wells. It acquires and manages oil and gas properties and operates in a number of US states.\So what's happening to Diversified's share price? Well, as I write, the shares are trading at 92p. This time last year they were trading at 135p, a 35% drop over the 12 month period.It's worth remembering that many stocks have pulled back due to macroeconomic struggles. These include soaring inflation and rising interest rates.

Advantages and disadvantages

Starting with the bull case, the obvious factor that attracts me right now is the 14.5% dividend yield. For any dividend stock I'm considering, I want to know if the yield, however unusually high, is sustainable. I can see the business supporting its free cash flow, of which it has plenty.

It likes to borrow money to finance acquisitions, even though it has a great track record of paying down debt. Finally, it has a good record of paying dividends. However, I am aware that dividends are never guaranteed.

Moving on, acquisitions are usually a positive sign for me. This is because it shows growth aspirations that could boost future profits as well as investor returns. Last year, Diversified spent half a billion dollars on acquisitions.

Finally, Diversified's business model and current energy prices could increase performance and returns. If it can get cheap oil and gas wells and sell the power at market prices, it could make money. After all, energy prices are currently rising.

Looking at the bear case, Diversified could see earnings and payouts fall if energy prices fall. This is one of the biggest issues I will have to watch out for.Also, while I'm a fan of acquisitions, they don't always work out. The cost of purchasing, maintaining and potentially selling a non-performing asset can be costly to Diversified. This could also affect any dividends.

Finally, I mentioned that Diversified typically borrows to finance acquisitions. Based on past records, it usually pays off pretty easily, too. My concern is that rising interest rates are making debt more expensive to service and repay. These higher costs could affect investors' profits and returns.

I would buy a dividend stock

After reviewing the pros and cons, I decided that I would be willing to buy some shares of Diversified Energy Company for my stake. I will do so when I have free money to invest.

I am aware of several ongoing risks that could derail Diversified's progress. Overall, I was pleased with the company's business model and performance and payout records, as well as the current energy market. While I'm aware that past performance is no guarantee of the future, I think this is one dividend stock that would boost my holding.

It seems ridiculous, but we almost never see stocks that look this cheap. Still, this recent "Best Buy Now" has a price-to-book ratio of 0.51. In plain English, this means that investors are effectively entering a business that holds £1 worth of assets for every 51 pence they invest!

Of course, this is the stock market, where money is always at risk — these valuations can change and there are no guarantees. However, some risks are much more interesting than others, and at The Motley Fool, we believe this company is one of them.What's more, it currently boasts a stellar dividend yield of around 8.5%, and it's possible for investors to jump in at near-historic lows right now. Want to make a name for yourself?

In the fast-moving world of investing, opportunities that promise attractive dividends often attract the attention of savvy investors. One such prospect currently making waves is a dividend stock with an impressive 14% yield. But is this opportunity really too good to pass up? Let's dive into the details and explore the potential benefits of this high-yielding dividend stock.

A dividend yield of 14% is undoubtedly eye-catching. That's well above the average yield of most dividend-paying stocks. This high yield suggests that for every dollar you invest in this stock, you could receive dividends of 14 cents annually. This can be a tempting prospect for income-seeking investors looking to grow their wealth through dividends.

The importance of due diligence:

While the 14% dividend yield is appealing, it is essential to do thorough due diligence before making any investment. High returns can sometimes be a sign of underlying risks. It is very important to assess the financial health of the company, the sustainability of dividend payments and its prospects for future growth.

Look beyond the impressive yield and delve into the company's financial statements. Are they generating enough cash flow to sustain these dividend payments? Is the company burdened with excessive debt? Are there any signs of a decline in revenue or profitability? A stable and growing company is more likely to maintain its dividend payout.

Diversification and risk mitigation:

Diversification is a key tenet of smart investing. While that 14% dividend yield seems tempting, it's important not to put all of your investment funds into a single opportunity. Spreading your investments across different sectors and asset classes can help mitigate risk and provide a more stable income stream.

If you are unsure about the potential of this high yielding dividend stock, it is a good idea to consult with financial professionals or investment advisors. They can provide valuable insights, assess risks, and guide you in making informed decisions that align with your investment goals and risk tolerance.

A dividend yield of 14% certainly attracts attention, but it is necessary to conduct thorough research, assess the financial health of the company and consider the principle of diversification. While this opportunity may represent considerable potential, it is essential to approach it with caution and seek professional advice when necessary. With the right strategy and a clear understanding of the risks involved, you can make the most of this exciting investment prospect.