Looking for FTSE 250 income stocks? Here are 2 of my favourites

The FTSE 250 (INDEXFTSE: MCX) is full of income stocks, but these two have particularly desirable qualities, says Rupert Hargreaves.

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If you’re looking for FTSE 250 income stocks, there are plenty of opportunities out there right now. Today, I’m going to outline my two favourite opportunities on the market.

Hedge your bets

Man (LSE: EMG) is one of the world’s largest listed hedge funds and, as well as producing attractive returns for its clients, it also looks after its shareholders. At the time of writing, the stock supports a dividend yield of 5.5% and the payout is covered 1.6 times by earnings per share.

City analysts are expecting the company to report a big jump in earnings per share this year and, according to a trading update for the first quarter of 2019 published by the company today, it looks as if the group is on track to meet this projection. During the first three months of the year, Man attracted an additional $3.8bn in funds, taking the total value of funds under management to $112.3bn at the end of the opening quarter.

As Man charges clients based on the value of assets invested with the company, more funds invested means higher management fees, which is excellent news for shareholders. As well as its market-beating dividend, the firm has also been buying back stock as an alternative way of returning cash to investors. So far, Man has spent $65m of its $100m share repurchase authorisation, announced in October 2018.

Management’s decision to initiate a stock buy-back, as well as the company’s 5.5% dividend yield, tells me it’s committed to returning additional capital to investors. That’s why I think this is one of the best income stocks in the FTSE 250.

As well this highly attractive cash-return strategy, shares in the company are also trading at a relatively undemanding 11 times forward earnings. With earnings growth of 60% pencilled in for 2019, the stock is trading at a PEG ratio of 0.5.

The house always wins

The other FTSE 250 income stock I think you should consider adding to your portfolio today is William Hill (LSE: WMH).

Shares in this gambling giant have been under pressure for the past 12 months due to concerns about the impact of the government’s decision to restrict the maximum stake on all fixed-odds betting terminals to just £2. The group revealed the financial cost of this decision at the beginning of March when it announced it’s writing down the value of its high street estate by £883m. Management also expects the changes to cost the business around £70m-£100m per annum in lost profits.

This is a significant setback for the group but, in my opinion, it will be more than offset by the growth of the US sports betting market. Estimates vary, but figures suggest the market could be worth $8bn by 2030 and William Hill is fighting to grab as much of the market as possible. The company has already announced several collaboration agreements with US partners and, in my opinion, concentrating on dominating this market is far more important to the business than the loss of its fixed-odds terminals.

With this being the case, I reckon it might be a good time to snap up shares in the gaming giant today and pocket the 5.7% dividend yield the stock currently offers while the US growth story plays out.

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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