The Motley Fool

3 FTSE 250 dividend stocks to buy

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.

Young woman smiling putting a coin inside piggy bank as savings for investment
Image source: Getty Images

I’ve recently been searching for FTSE 250 dividend stocks to buy. Following my research, here are three companies that I’d buy for their income credentials. 

FTSE 250 dividend stocks

The first company I’d buy for my portfolio of dividend stocks is the insurance business Sabre Insurance (LSE: SBRE).

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

With a historical dividend yield of around 8.2%, this company offers one of the highest dividend yields in the FTSE 250. However, analysts expect the payout to fall this year due to the pandemic.

On a forward basis, the company could yield 5.6%. That’s still pretty good in my eyes. While the organisation remains cautious about the rest of the year, Sabre is starting to see an improvement across business lines, according to its recent trading update. I think this could support future dividend growth. 

The biggest challenge the business faces is remaining competitive in the fiercely competitive UK car insurance market. If Sabre can’t stay ahead of its competition, the company could struggle to grow. This would hurt profit and dividend growth. 

Even after taking this into account, I would buy the company for my FTSE 250 dividend stocks portfolio. 

Growing profits

I would also buy Jupiter Fund Management (LSE: JUP). According to the company’s latest trading update, for the three months ended 31 March, assets under management (AUM) were £58.8bn, up £0.1bn from the end of 2020.

As the company earns a management fee on the assets under its administration, rising AUM indicates higher profits. That’s just what City analysts are expecting for 2021. They’ve pencilled in earnings growth of 7.8% for the year. 

Based on these forecasts, the stock trades at a forward price-to-earnings (P/E) multiple of 10.7. I think that books cheap, especially when combined with the company’s 6.4% dividend yield.

The main risks and challenges facing the business today are competition, which could force the company to lower management fees. More regulation may also lead to increased costs, which could depress profit margins and profitability.

Despite these risks, I would still buy. 

Rebound expected 

Most financial companies reported significant losses last year as they prepared for defaults due to the coronavirus crisis. Close Brothers (LSE: CBG) was no exception. Group net income slumped around 50% last year. 

However, analysts are expecting a strong recovery over the next two years. Net income could return to pre-pandemic levels by 2022, according to City projections.

Based on the fact that many other lenders have recently been revising their losses lower due to fewer than expected write-offs, I think the company stands a good chance of outperforming these projections. Although, I should say this is just my view, and it is far from guaranteed. Another coronavirus wave could send losses skyrocketing, and this would set Close Brothers’ recovery back by as much as a year. 

Still, with a dividend yield of 3.6% at the time of writing, I would add the company to my portfolio of FTSE 250 dividend stocks. 

The Motley Fool UK's Top Income Stock...

We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.

But with this opportunity it could get even better.

Still only 55 years old, he sees the chance for a new “Uber-style” technology.

And this is not a tiny tech startup full of empty promises.

This extraordinary company is already one of the largest in its industry.

Last year, revenues hit a whopping £1.132 billion.

The board recently announced a 10% dividend hike.

And it has been a superb Motley Fool income pick for 9 years running!

But even so, we believe there could still be huge upside ahead.

Clearly, this company’s founder and CEO agrees.

Learn how you can grab this ‘Top Income Stock’ Report now

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.