Why I’d ignore Bitcoin and buy this dirt-cheap, 7%-yielding FTSE 250 dividend stock

Royston Wild pores over a FTSE 250 (INDEXFTSE: MCX) income hero that’s a much better buy than Bitcoin.

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Why would anyone buy Bitcoin right now? Any investment of course involves the balancing of risk and reward but, as far as I’m concerned, the virtual currency simply contains too much peril to make it a sensible destination for your cash.

Discussions over regulation are picking up pace. Sure, the next important stage in Bitcoin’s journey in becoming a mainstream asset. But there remains a raft of reasons why the asset could continue to add to 2018’s painful decline, from that persistent scepticism over the underlying value of the currency, to the broad decline in market confidence that’s sapping demand for all so-called riskier assets.

Regulatory woes

Dip buyers looking to grab a bargain would be better, then, to forget about buying Bitcoin at the present time. A better contrarian buy is 888 Holdings (LSE: 888), in my opinion, a share that has fallen more than 40% in value over the past 12 months.

Like Bitcoin, concerns over regulation is a big problem for the gambling sector, and this caused 888 to slide last year. It’s a problem that will never go away, and is one that has intensified over the past few days.

A loosening of gambling laws in the US last year powered up the revenues outlook for 888 and many of its peers, such as William Hill and GVC Holdings. It has also prompted some of the sector’s major players to double-down on US investment to make the most of this increasingly-favourable backdrop.  Last month, 888 bought out the 53% stake it didn’t already hold in its All American Poker Network joint venture for $28m. This followed the launch of 888sport.com in New Jersey in September, the first sports gambling brand that it’s rolled out over in the States.

But 888’s share price suffered a fresh hammerblow on Tuesday when the Department of Justice decided to backpeddle on its decision eight years ago concerning the 1961 Wire Act, meaning that all forms of online gambling is prohibited across state boundaries, and not just sports gambling.

Bad news priced in?

A setback for sure, but one whose full implications on the poker market, and other casino games, are yet to be fully understood. GVC Holdings on Thursday told Reuters that “for sports betting we don’t see [the DoJ decision] having any impact,” providing some possible crumb of comfort for the gambling industry.

I would say that 888’s low, low forward P/E ratio of 11.5 times bakes in this news, and represents decent value when you consider the progress the business is making elsewhere. Last month, it advised it has maintained its “strong momentum” in regulated European markets, a territory in which it bolstered its footprint in December when it was awarded a gaming licence to provide online casino, sport and poker services in Sweden.

City brokers are expecting 888 to bounce back into earnings growth in 2020, leading them to predict dividends will keep shelling out abundant dividends. Projections of 15.1 US cents per share in 2019 and 15.9 cents the year after, yield 6.9% and 7.3%, respectively. 888 gives plenty of bang for your buck right now, and I reckon it’s a great buy for all contrarian investors.

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 considered so you should consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. 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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