2 of the best dividend stocks to buy from the FTSE 250

Paul Summers picks out two of what he considers to be the best dividend stocks from the second-tier of the London market.

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I’d never turn down a dividend from a company I own. After all, this cash can then be reinvested in the market, allowing me to benefit even more from compound interest. With this in mind, here are what I consider to be two of the best dividend stocks from the FTSE 250.

Record trading

Online trading provider IG Group (LSE: IGG) has been throwing dividends at my own portfolio for years now. Today’s record full-year results suggest this income stream will continue (and then some). 

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As one might expect, the hugely volatile markets over the last year have attracted more people to trade via IG’s platform. The number of new and active clients jumped 39% and 31% respectively. As a result, net trading revenue rose 31% to £853.4m over the 12 months to the end of March. Pre-tax profit also rocketed 52% to a little over £450m.

And the dividends? Today, IG announced that it would be returning a total payout of 43.2p per share to holders. At the current share price rise, that’s a chunky yield of 5%. Based on the firm’s outlook, I’m increasingly confident this will rise in the future.

CEO June Felix believes the company is now in “a better position than ever before” and I’m minded to agree. Having exceeded its own expectations, IG said that it would now be issuing new strategic targets. Predicted revenue growth from its ‘Core Markets+’ was increased to 5-7% per annum over the medium term. In its ‘High Potential Markets’ division (which now includes the lucrative US options and futures market), it’s looking for 25-30% per annum.

Income and growth. That sounds pretty good to me!

Big dividends

Another of the best dividend stocks from the FTSE 250, in my opinion, is self-storage firm Big Yellow Group (LSE: BYG)

In today’s update, the company said that occupancy growth over the three months to the end of June had been “significantly ahead” of that seen over the same period in 2020. Total revenue rose 15.1% to £36.6m.

A good proportion of this demand can be attributed to the tapering off of the stamp duty holiday and home movers looking to temporarily store their possessions. A lot of students were also wanting to use the company’s sites.

Like-for-like occupancy now stands at 91%. As such, I think it’s fair to say that there’s no danger of the UK becoming a nation of minimalists just yet. As one might expect, Big Yellow is capitalising on this. It’s continuing to acquire and open new sites around the UK.

Ultimately, this should be good news for dividend hunters. While the firm doesn’t pay out as much as IG at only 2.6%, the relatively defensive and simple business model makes me think dividends will continue steadily increasing.

No guarantees

All that said, it must be remembered that dividends are based on trading. And trading can never be taken for granted. IG Group could (and probably will) struggle to repeat its recent performance if markets settle. Big Yellow already expects to return to “normal seasonal trading patterns” later in the year. Add in the obligatory Covid-19 uncertainty and a smooth ride is far from guaranteed.

Based on these updates and the risk/reward trade-off, however, I still consider these to be two of the best dividend stocks in the FTSE 250. I’d feel comfortable buying either today. 

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Paul Summers owns shares in IG Group. 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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