1 FTSE 250 dividend stock I’d buy for my ISA and one I’d sell

International expansion should drive dividend growth at this FTSE 250 (INDEXFTSE: MCX) income champion.

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Shares in casino operator Rank (LSE: RNK) are diving today after the company reported flat revenue growth for the 40 weeks to Sunday.

Specifically, while the group saw double-digit growth at its online business during the period under review, revenues at the casino and bingo businesses declined 3% and 2%, respectively.

Rank’s Grosvenor casino and Mecca bingo venues have been impacted by “weaker than expected” visits “compounded” by two periods of cold weather. Unfortunately, it seems trading has only deteriorated further as 2018 has progressed. 

During the last 13 weeks, Grosvenor’s revenue has declined 9%, as the slowdown has been “exacerbated by a negative contribution from its VIP players.

The one bright spot in the trading update is the reported growth at its digital arm. UK online revenue rose 17% on a like-for-like basis for the 40-week period.

Sharpe contrast 

Rank’s performance contrasts sharply with that of its larger international peer William Hill (LSE: WMH). 

At the end of February, William Hill posted an underlying pre-tax profit of £225m for 2017, up 19% year-on-year as net revenues increased 7% to £1.7bn. Like Rank, William Hill’s brick & mortar stores suffered while its online business flourished, although the decline in sales at betting stores for the period was only 1%. Meanwhile, net revenues at its online business, which is predominantly in the UK and Europe, rose 13%.

Based on these growth figures, it looks to me as if William Hill is a better investment than Rank. That  said, William Hill is not without its own problems. 

The company is still waiting on the outcome of the UK government’s review of fixed odds terminals. The Gambling Commission has recommended setting the maximum stake for these terminals at £30, significantly above the worst-case scenario figure of £2 that anti-gambling campaigners have called for. But until the government announces its final decision on the matter, the outlook for William Hill and its peers remains uncertain.

Still, I believe that the company should be able to offset any negative impacts from a lower stake limit by cutting costs and expanding its online division both in the UK and abroad. 

For example, the group’s US business — where it’s a leader in the sports betting market — reported adjusted operating profit growth of 24% for the 52 weeks to 26 December 2017.

Dividend growth 

If the company can continue on its growth trajectory, then I believe it’s a much better income investment than Rank. At the end of February, William Hill hiked its full-year dividend per share by 6% to 13.2p, in line with the policy to pay out approximately 50% of underlying earnings.

This increase means the shares are now yielding 4.2%, compared to Rank’s 4%. What’s more, Rank’s problems indicate to me that the firm will struggle to grow its payout in the years ahead, while William Hill, with its fast-growing international business, seems to have a much brighter dividend growth outlook.

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.

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