2 top FTSE 250 dividend stocks with 4%+ yields

Two FTSE 250 (INDEXFTSE: MCX) dividend stocks with solid fundamentals and lots of upside potential.

| 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’re looking for the best income opportunities, I think it’s important to look beyond the well-covered FTSE 100 names to find dividend growth stocks that are available at attractive valuations. There are plenty of hidden gems in the small-cap and mid-cap segments of the market, offering investors the opportunity to buy into companies with solid fundamentals and lots of upside potential.

Tempting growth

Brewin Dolphin (LSE: BRW), the FTSE 250 investment management company, seems attractive to me because of its tempting outlook on earnings growth.

Amid a changing market landscape, the company is leveraging its current strengths to take advantage of shifting in client needs. It has positioned itself in a strong position to take advantage of the fast growing intermediaries-led channel and has continued to attract steady fund inflows, which is translating into healthy earnings growth and further growth opportunities.

Brewin Dolphin is also continuing to move away from traditional stockbroking towards higher-margin wealth management services, a market where it is seeing robust double-digit revenue growth. Against an uncertain macroeconomic backdrop, its expanding advice-led proposition has enduring relevance for customers in uncertain and complex times.

Undemanding valuations

With the company well placed to invest and innovate for further growth opportunities, valuations seem undemanding. Although the stock trades at 17.1 times its adjusted earnings last year, City analysts are predicting underlying earnings growth of 8% this year, with an acceleration to 12% for 2019. As such, its forward P/E is a more modest 15.7 on this year’s expected earnings, and is set to fall further to just 14 by 2019.

Dividends per share are also forecast to grow impressively, from 15p last year, to 16.6p this year and to 18,3p by 2019, representing annualised dividend growth of more than 12%. This means its yield is set to rise from 4.4% currently, to just over 5.3% within two years.

Favourable fundamentals

Elsewhere, Tritax Big Box REIT (LSE: BBOX), the landlord and developer of large-scale logistics facilities, also offers enticing dividend growth.

Favourable market fundamentals, particularly the shift towards e-commerce and tight supply of suitable properties, means management is confident about delivering continued growth in rental income and property values in 2018. The company also has an attractive short cycle pipeline of new pre-let developments, adding to its outlook of value creation.

Resilient sector

In 2017, the company achieved growth in net asset value (NAV) per share of 10.3% to 142.2p, demonstrating the resilience of the warehousing sector amid a slowdown in the wider property market.

Looking ahead, it isn’t too concerned about Brexit either, as it reckons increased border controls would mean its customers would require more warehousing domestically, further increasing demand for the type of property which the company invests in.

Shares in the REIT are fairly valued, with its share price in line with its NAV, down from a 12% premium a year ago. Tritax Big Box REIT also offers a tempting prospective dividend yield of 4.7%, up from 3.6% last year.

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.

Jack Tang has no position in any shares 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

Investing Articles

Is the Centrica share price a compelling value play?

I'm always on the lookout for investments that might be undervalued, but is the Centrica share price as cheap as…

Read more »

Investing Articles

Down 88% since its peak! Is this one of the best UK shares to buy now?

I see lots of potential shares to buy on the UK stock market right now, but I don't see explosive…

Read more »

Investing Articles

Should investors be looking at the Barclays share price?

The Barclays share price has been in rally mode lately, but is the best still to come for new investors?…

Read more »

Investing Articles

Here’s what Stocks & Shares ISA investors are buying today!

ISA investors are piling into these UK and US stocks. But which could be the best buy right now? Royston…

Read more »

Investing Articles

2 powerful passive income stocks investors should consider snapping up

Building a passive income stream via dividend-paying stocks is possible, according to our writer, who details two picks to take…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing For Beginners

This UK stock has gained 42% since I bought it, but I think it’s still a bargain

Jon Smith outlines his reasons for thinking that a UK stock he owns has the potential to keep rallying for…

Read more »

Investing Articles

1 under-the-radar value stock I’m eyeing up for returns and growth

This Fool is looking for quality stocks at bargain prices and reckons this potentially overlooked value stock could be a…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

National Grid shares have plunged — but if I’d bought 2 years ago, would I be in profit?

National Grid shares are about 22% lower than in May, but that may just be a small blip for long-term…

Read more »