Two FTSE 250 dividend growth stocks I’d buy in October

Looking for dividend stocks? Check out these under-the-radar FTSE 250 (INDEXFTSE: MCX) gems, says Edward Sheldon.

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If you’re looking for dividend stocks for your portfolio, the FTSE 100 is generally a good place to start. However, it can also be worth looking at the FTSE 250. This index is home to a number of companies that offer robust dividend yields and many offer the potential for strong dividend growth too. With that in mind, here’s a look at two FTSE 250 dividend growth stocks I’d be happy to buy for my portfolio in October.

The start-up capital of the world?  

The start-up scene in London is absolutely thriving right now. Indeed, according to some analysts, London could soon eclipse San Francisco as the start-up capital of the world. For this reason, I continue to see investment appeal in Workspace Group (LSE: WKP) – a Real Estate Investment Trust (REIT) that specialises in providing co-sharing office space for early-stage companies in London. To my mind, it’s a classic ‘pick-and-shovel’ play on the start-up scene – the group should profit no matter how successful individual businesses are.

Workspace’s first-quarter trading update in mid-July revealed that the group has momentum at the moment despite the uncertain economic environment. During the quarter, the company completed 121 lettings, an increase of 38% on the same period last year, while enquiries rose to 1,060, up from 1,021 last year. CEO Graham Clemett, said: “It has been a busy and successful quarter for the Company. Our distinctive flexible offer continues to attract strong demand from a broad range of customers, despite the challenging economic environment.”

From a dividend-investing perspective, WKP looks attractive in my view. The group has raised its dividend significantly in recent years and analysts expect a payout of 37p per share for the year ended 31 March 2020. At the current share price, that equates to a yield of 3.9%.

Turning to the valuation, Workspace shares currently trade on a forward P/E ratio of 21.3. That may not be a bargain but I think it’s a reasonable valuation given the company’s growth prospects. Overall, I think the stock offers the potential for both long-term capital growth and dividend growth.

Positive long-term fundamentals 

Another FTSE 250 dividend stock that I continue to rate as a ‘buy’ is Tritax Big Box (LSE: BBOX), a REIT which owns a portfolio of large-scale logistics facilities known as ‘big boxes’. These big boxes are let out to retailers such as Amazon, Argos, and Ocado, who store their goods in the facilities before distributing them to customers.

Tritax’s half-year results, released in August, showed that the company continues to advance. Over the period, the group’s property value increased by 12.6%, while operating profit rose 5.7% on the same period last year. It’s also worth noting that Chairman Sir Richard Jewson was upbeat in his assessment of the company’s future outlook, stating: “The long-term fundamentals of our market are positive. The sector continues to benefit from the structural change in shopping habits, as consumers switch from the high street to buying online, creating ongoing demand for logistics space to fulfil these orders.”

Like WKP, Tritax offers an attractive dividend. The group’s goal is to pay out 6.85p per share for FY2019, which equates to a prospective yield of 4.6% right now. With the stock trading on a reasonable P/E ratio of 22, I think now is a good time to be buying.

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.

Edward Sheldon owns shares in Tritax Big Box REIT. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Tritax Big Box REIT. 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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