Purchasing stocks with a high dividend yield can be a great way to build long-term wealth. I can use the large payouts I receive to buy more shares which, thanks to the power of compounding, can significantly accelerate the growth of my investment, over time.

Vistry Group’s (LSE:VTY) one passive income stock I think merits serious attention right now. Here’s why.

Gaining momentum

Buying housebuilder shares could be a great idea in September as the market recovery goes on. Latest figures from Nationwide showed average home prices rose 2.4% year on year in August, the fastest rate of growth for two years.

Prices are now rising at a pace not seen since the Bank of England started raising interest rates two autumns ago. And with Threadneedle Street looking set to cut its lending rate multiple times over the next two years, the improvement could accelerate sharply in the months ahead.

For dividend investors, I think Vistry could be a good stock to buy to capitalise on this potential upsurge. I particularly like its focus on the affordable end of the housing market spectrum, where demand’s especially strong.

This strategy helped the company put in a showstopping performance in the first half of 2024. Completions rose 9% year on year, while adjusted operating profit improved 10%. Meanwhile, forward sales improved 19%, providing strong earnings visibility looking ahead.

Now for dividends…

Vistry doesn’t have the biggest dividend yield out there for 2024. But it’s worth mentioning that the yield still beats the 3.2% forward FTSE 250 average.

It’s also important to consider that the housebuilder’s yields rise rapidly over the next couple of years as dividends are predicted to rise.

On the downside, dividend cover for Vistry over the period falls below the security benchmark of 2 times. Predicted cash rewards through to 2026 are covered between 1.3 times and 1.7 times by anticipated earnings.

Still, the homebuilder has a strong and improving balance sheet it can employ to help it pay dividends if earnings disappoint. This is underlined by its plan to return £1bn to shareholders via buybacks and dividends over the next three years, reflecting its strong financial foundations.

Indeed, it expects to be in a net cash position by the end of 2024 (net debt was £322m as of June).

A passive income gem

As with any share however, Vistry’s earnings and dividend forecasts come with risks attached. If interest rates fail to fall meaningfully, the housing market’s rally could well run out of steam. Housebuilders also face the ongoing problem of cost inflation.

But on balance, I think things are looking good for the FTSE 250 builder. I’m especially encouraged by the government’s plans to boost new home creation to 300,000 a year by reducing planning hurdles for construction firms.

I think Vistry could be one of the hottest dividend growth stocks to watch today.