Got £1,000 to invest? I’d buy this FTSE 250 high-yielder

Harvey Jones is swayed by this FTSE 250 (INDEXFTSE:UKX) recovery stock’s bargain share price and juicy yield.

| 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.

Like most of the mining sector, FTSE 100 listed Chilean copper specialist Antofagasta (LSE: ANTO) is at the mercy of global economic sentiment in general, and China’s fortunes in particular.


China is the world’s biggest importer of natural resources, but that source of demand is threatened by President Donald Trump’s trade war. The Antofagasta share price has tumbled more than 13% in the last month as investors have grown nervous about the slowing world economy and lack of progress towards a trade deal.

It is flat today despite a positive half-yearly report showing EBITDA earnings up 44% to $1.3bn, helped by a 19.1% increase in revenue to $2.5bn, due to higher copper sales volumes and by-product revenues. That helped to make up for a 6.3% drop in the realised copper price.

CEO Iván Arriagada hailed today’s “robust” results with higher production across all operations, and copper up 22%. He expects this to continue with “another year of record copper production”.

Costs and competition

Antofagasta’s Cost and Competitiveness Programme is yielding savings and despite the uncertain outlook and trade talk concerns, Arriagada said Antofagasta continues to be in a strong position generating solid cash flows and improving returns”

The £8bn group paid an interim dividend of 10.7 cents per share, equivalent to 35% of net earnings, and a rise of 57.4% on last year’s interim. However, the forecast yield of 3.2% is a little disappointing against a FTSE 100 average of around 4.3%, even with cover of 1.9.

Antofagasta trades at 15.5 times forecast earnings, so it isn’t hard to find cheaper FTSE 100 stocks paying far more generous levels of income. While City analysts expect a 22% rise in earnings this year, they anticipate a 2% drop in 2020. Copper is a bellwether for a troubled global economy and the stock isn’t trading at enough of a discount to tempt me, given today’s macro and political challenges.

Play it again

FTSE 250-listed gaming software provider Playtech (LSE: PTEC) has given investors a rough ride as profit warnings hit sentiment and its stock fell 60% measured over two years, and today brought little to reverse negative sentiment.

The £1.19bn group saw half-yearly profits before tax dropping 77% year-on-year to €28m, as distribution costs exactly doubled from €246m to €492.8m. Management slashed its dividend by 50%, from 12.1 euro cents per share to 6.1 cents. Yet the market response was reasonably benign, with the Playtech share price holding steady today.

Tech play

On the plus side, revenue rose 69% to €736.1m, boosted by last year’s acquisition of SnaiTech, which posted 26% growth in adjusted EBITDA to €74.7m. Management is sticking to full-year guidance, which suggests that adjusted EBITDA will fall to between €390m and €415m. That is despite a drop in forecast revenues at its Asian business, from €150m at the start of the year to €115m.

However, Playtech does now offer a juicy forecast yield of 6.3%, with cover of 2.1, coupled with a bargain valuation of 7.3 times forecast earnings. Until I saw those figures, I wasn’t tempted to recommend the stock. Now I think it might just be a good recovery play. Or you might prefer these FTSE 250 rivals.

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.

Harvey Jones has no position in any of the 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

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

1 dividend stock with a juicy yield to boost returns!

This Fool likes the look of this dividend stock to boost his passive income stream and explains why he would…

Read more »

Happy male couple looking at a laptop screen together
Investing Articles

Here’s 1 growth stock primed for long-term growth and returns!

Jabran Khan is hunting for a growth stock to boost his holdings. Could this financial advisory business be the right…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 FTSE 250 shares I bought for extra dividends

I plundered the FTSE 250 index to find these three cheap stocks with ailing share prices. All three firms pay…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m buying cheap FTSE 100 stocks to boost my passive income!

Buying dividend stocks today could considerably improve the amount of passive income I make. Here are some FTSE 100 stocks…

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

Am I crazy for buying Royal Mail shares?

Royal Mail shares have collapsed by almost half in 2022. And with group profits falling and strike action under way,…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

2 recession-resistant stocks to buy right now

After the pandemic slump, we're now facing a UK recession. Many are looking for recession-resistant stocks to protect their money.

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

This FTSE 100 stock continues to fall! Should I buy shares?

This Fool takes a closer look at a FTSE 100 quality assurance stock. As the shares continue to fall, is…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Is the Rolls-Royce share price about to surge?

The Rolls-Royce share price continues to fall as market patience wears thin. But could it be on the brink of…

Read more »