3 FTSE 250 dividend stocks to buy

This Fool highlights the FTSE 250 dividend stocks he’d buy for income today considering their growth potential and valuations.

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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).

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. 

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 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.

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