3 FTSE 250 stocks I’d buy for 2020

Roland Head picks three FTSE 250 (INDEXFTSE: MCX) dividend stocks he’d buy for all-weather performance.

| 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.

By the time you read this, Parliament might have agreed a Brexit deal. Or it might not.

But I think that the three stocks I’m considering today should be attractive buys regardless of the political landscape.

Between them, they offer a mix of international and UK exposure. They also combine defensive qualities with cyclical opportunities.

Compare this

Price comparison websites are no longer just the middleman. Increasingly, they’re a destination in themselves. That’s no accident.

Moneysupermarket.com Group (LSE: MONY) and its main rivals have all been investing heavily in technology and marketing to build direct relationships with their users. Two areas of growth being targeted by Moneysupermarket are mortgage price comparison and automated utility switching.

However, the Moneysupermarket share price hit a stumbling block last week, after reporting a marked slowdown in growth during the third quarter.

My view: Moneysupermarket’s evolution from comparison website to finance business won’t be seamless. Personally, I see this slump as a decent buying opportunity. The company remains incredibly profitable, with an operating margin of 30% and a big share of the UK market.

Last week’s dip has left the shares trading on 19 times forecast earnings, with a forecast yield of 4%. I believe this remains a long-term growth story. I’d be a buyer at this level.

An international growth engine

Another FTSE 250 company that’s hit a speedbump in recent years is temporary power supplier Aggreko (LSE: AGK). This global business provides equipment and complete power solutions for events, remote sites, and utility customers in emerging markets.

After a difficult spell, performance has been improving steadily. I believe this is likely to continue. The group has an approximately $200m deal to provide power for the Tokyo Olympics next year and boss Chris Weston is confident that profitability should continue to improve.

My view: Analysts’ forecasts suggest that earnings will rise by a chunky 25% in 2020, valuing the stock at just 12 times forecast earnings, with a dividend yield of 3.6%.

I think that looks decent value, especially as the group’s operating profit margins are now heading further into the mid-teens. Aggreko has been on my watch list for a while – I’m considering a purchase over the coming weeks.

A defensive earner

My final pick is ingredients firm Tate & Lyle (LSE: TATE). This FTSE 250 company has not cut its dividend for more than 20 years.

Tate’s defensive mix of products – which includes sweeteners and specialist ingredients used by food manufacturers – suggests to me that its profits should be fairly stable, even in a recession.

Although this isn’t the most exciting of growth stocks, I see this as a stock you could buy and tuck away for a few years, while collecting a useful 4%+ dividend income.

The group’s results from last year show that adjusted pre-tax profit rose by 4% to £309m, while net debt fell to £337m. That level of borrowing looks reassuringly low to me, which should provide a further layer of safety if the economy hits tough times.

My view: At the time of writing, the shares are trading at about 670p, giving the stock a forecast price-to-earnings ratio of 13 and a dividend yield of 4.4%. TATE stock has been as high as 800p over the last year, but I’d view the current price as a much better entry point. I’d be happy to buy current levels.

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.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »