£5k to invest? I think these FTSE 250 dividend stocks could double your money

This Fool highlights two undervalued FTSE 250 income and growth stocks that could produce returns of more than 100%.

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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.

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The recent market declines have thrown up some fantastic bargains for value investors. Indeed, some FTSE 250 dividend stocks have even halved in value since the beginning of the year.

For investors who can take a long-term outlook, these opportunities could be too good to pass up. With that in mind, here are two FTSE 250 dividend stocks that have the potential to double investors’ money over the next year or so.

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FTSE 250 dividend income

Shares in challenger bank Virgin Money (LSE: VMUK) have fallen by more than 40% since the beginning of February. The stock has slumped by nearly 60% since the beginning of December.

However, despite these declines, this FTSE 250 dividend champion looks to be in rude health. After announcing a shock PPI bill at towards the end of last year, the company soon recovered its composure by reporting business lending growth of 2.5%.

Management also informed the market that despite the PPI bill, the rest of the business was on track. The group’s profit margins are expected to be in line with forecasts for 2019.

Management also recently announced 500 job losses and 52 branch closures to help improve profitability. This is part of the organisation’s cost-cutting plan announced at the time of the Virgin Money and Clydesdale and Yorkshire Banking Group merger in 2018.

Based on the company’s projections for growth, City analysts believe the lender is on track to report earnings per share of 22.9p for its 2020 financial year. That puts the stock on a price-to-earnings (P/E) ratio of 5.7, compared to the market average of 11.6.

Shares in the challenger bank are also dealing at a price-to-book (P/B) value of 0.4, suggesting the stock offers a wide margin of safety at current levels. Analysts also believe this FTSE 250 dividend champion could yield 5.1% next year.

Playtech Ltd

FTSE 250 dividend star Playtech (LSE: PTEC) also looks as if it has the potential to double investors’ money over the next few years. Since the beginning of the year, shares in Playtech have slumped by 48% excluding dividends. After this decline, the stock is dealing at a P/E ratio of just six. The software sector average is 19. This implies the stock is undervalued by around 70% at current levels.

So, what’s gone wrong with the business? It’s difficult to tell. The company is currently building out its developed or regulated market gaming business. This has caused some earnings turbulence. Nevertheless, City analysts are forecasting earnings growth of 88% this year, followed by growth of 14% in 2021.

It seems investors are also concerned about the impact the coronavirus outbreak might have on the organisation’s operations. While this is a valid concern, some online gaming companies in Asia have been reporting an increase in player numbers as the number of people in quartine or isolation grows.

Therefore, while it’s difficult to tell what impact the outbreak will have on the FTSE 250 dividend champion’s bottom line, but inial indications suggest it could be minimal. 

As such, now might be a good time to snap up a share of Playtech. A dividend yield of 7.3% only sweetens the appeal.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves 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.

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.

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