Have £1,000 to invest? Why I believe you can’t go wrong with this FTSE 250 income champ

This FTSE 250 (INDEXFTSE: MCX) stock has made its investors millions already, Rupert Hargreaves explains why this is set to continue.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you have just £1,000 to invest, there’s one stock out there that I believe deserves your money more than most based on its history of producing outstanding returns for investors.

This company might not be a household name, but that hasn’t stopped it. Beazley (LSE: BEZ) is one of the largest specialist insurance businesses in the UK. And with operations around the world, the business is truly a play on not just UK, but international economic growth as well.

Over the past 10 years, shares in the company have produced a total annual return for investors of 21.7%, turning every £1,000 invested into £7,127.

And I believe that this outstanding record of performance is set to continue.

Explosive growth 

After a rough 2017, when some of the biggest hurricanes ever to hit the United States caused billions in damage, which insurers like Beazley had to pick up the bill for, analysts are expecting the firm to return to growth this year. Earnings per share (EPS) are projected to rise 42% to $0.34 (26p) giving a forward P/E of 22. 

Growth is only expected to accelerate for 2019. Analysts have pencilled in EPS growth of 64% to $0.56 (43p). Based on this estimate, the stock is trading at a 2019 P/E of 13.4.

As well as breakneck earnings growth, Beazley has attractive dividend credentials. The dividend yield of 2.1% might not be the highest around, but the payout of $0.16 (12p) per share is covered twice by EPS. To me, this high level of cover suggests that the distribution is shielded from earnings volatility — one of the critical factors I like to consider when evaluating a firm’s dividend potential. Analysts are expecting the payout to hit $0.22 (17p) next year, providing a more lucrative yield of 2.9%.

Overall, looking at the company’s record of producing returns for investors, coupled with its growth outlook, I believe Beazley won’t let you down.

Low risk, high potential reward 

If you’re looking for an investment with more growth potential for your portfolio, you might want to consider Rockhopper Exploration (LSE: RKH). 

There’s lots to like about this oil minnow. For a start, the company is one of the few early-stage oil businesses with positive free cash flow.

According to half-year figures, published today, Rockhopper generated cash flow from operations of $4.9m during the first six months of 2018. With cash operating costs of $11 per barrel of oil produced, this looks set to continue.

Rockhopper’s funds are essential to support the development of its flagship Sea Lion development in the Falklands. Management is targeting year-end net cash of $30m (down from $46.4m at the end of the first half) and is planning to secure further financing for the prospect towards the end of 2018. Its partner on the $1.5bn project is Premier Oil which is pushing ahead with the development of Sea Lion. It could yield as much as 1.7bn barrels of oil in the best case.

What I like about Rockhopper is that the company is already self-sustaining but has huge upside potential if Sea Lion proves to be as good as expected. If everything goes to plan in the Falklands, Rockhopper could be a multi-bagger investment for shareholders.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. 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.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »