1 cheap dividend stock I’d buy to generate passive income

first_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Image source: Getty Images. Enter Your Email Address I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Zaven Boyrazian | Friday, 26th February, 2021 | More on: WKP “This Stock Could Be Like Buying Amazon in 1997” I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Office buildings have remained mostly empty over the past year due to Covid-19. However, with the vaccine rollout underway, people may soon be returning to the office for work. Which is excellent news for one cheap dividend stock I’ve recently stumbled upon. Should I consider adding it to my passive income portfolio? Let’s take a look.Generating passive income with real-estateWorkspace Group (LSE:WKP) is a real estate investment trust that owns 58 properties throughout London. It rents these out to businesses as flexible office space which, as previously stated, has unfortunately remained predominantly empty for months.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Covid-19 has not been kind to many office space providers, and Workspace Group is no exception. Occupancy rates throughout 2020 fell from 93% to 82%. But the stock was able to ensure rent collection rates stayed above 90%, which I thought was quite impressive. However, this figure is somewhat inflated when considering nearly 80% of its customers were given a temporary 50% discount on their leases. As a result, net rental income dropped by almost 40% at the end of 2020.Needless to say, these figures aren’t great, so why am I considering the stock as a source of passive income?A quickly recovering dividend stockA closer inspection of customer activity reveals a promising trend. The adverse effects of Covid-19 on office rentals appear to be evaporating.The level of customer enquiries, office viewings, and, most importantly, letting agreements has been steadily increasing since March 2020. Before the pandemic struck, the average number of lettings per month sat around 120. In March, that figure plummeted into the low 40s. But in the latest quarterly statement, average lettings between October and December 2020 were back up to 109.To me, this trend indicates the transition back to office working has already begun. Yet, the share price of Workspace Group remains well below its pre-pandemic levels, even though operational performance appears to be back on track. Simply put, the dividend stock looks too cheap in my eyes.Generating passive income with dividend stocks can be riskyWhile real-estate is often thought of as a ‘safe’ investment, it still has a degree of risk. Just look at what happened in 2008. Property values change, and it can have a significant impact on this business. Let me explain.Workspace Group uses debt facilities to acquire new properties for its rental portfolio. However, a fundamental restriction in these loans is a covenant surrounding the stock’s loan-to-value ratio. If the values of its properties decrease, the ratio increases and subsequently restricts the stock’s ability to acquire more loans.Another risk worth considering is the level of demand for office space. As Covid-19 perfectly demonstrated, the success of Workspace Group is entirely dependent on this. While I believe that many people will return to an office work environment, I also think that many businesses will continue with a work-from-home scheme even after the pandemic ends. As a result, the value of office space could decline, and with it, rental income.The bottom linePersonally, while these risks are significant, I think Workspace Group could enjoy a nice turnaround in 2021. And pairing that with a 4.7% dividend yield makes it a stock I’d want to have in my passive income portfolio.center_img Our 6 ‘Best Buys Now’ Shares Simply click below to discover how you can take advantage of this. Zaven Boyrazian does not own shares in Workspace Group. 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. 1 cheap dividend stock I’d buy to generate passive income Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! See all posts by Zaven Boyrazianlast_img