2 no-brainer FTSE 250 dividend shares to buy

Rupert Hargreaves explains why he believes these FTSE 250 companies are some of the best dividend shares to buy on the market today.

| More on:

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.

Close-up of British bank notes

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

When it comes to dividends shares to buy, I think investors can find some of the best opportunities in the FTSE 250. With that in mind, here are two mid-cap stocks that I believe are no-brainer income investments for me at current levels. 

FTSE 250 income

The first company is the music licensing investment trust Hipgnosis Songs Fund (LSE: SONG). 

This enterprise is one of only a handful of publicly-traded vehicles that allow investors to buy into music streaming rights. The group acquires catalogues of music streaming rights and then uses the income to fund additional acquisitions and sustain its dividend. 

At the time of writing, the stock supports a dividend yield of 5.7%. 

Some of its latest acquisitions include a catalogue from Fleetwood Mac songwriter and vocalist Christine McVie. This deal gave the company the song copyrights and writers’ share for seven of the 11 songs on the band’s self-titled album Fleetwood Mac, along with other intellectual property assets. 

The reason why I think this stock is a no-brainer buy is that as well as its market-beating dividend yield, it also trades at its net asset value. The last reported net asset value was $1.68 (125p) per share. I think this is a steal for a portfolio of intellectual property rights, which cannot be replicated. 

Those are the reasons why I would buy the stock for my portfolio today. However, I realise this might not be suitable for all investors as there is a certain level of uncertainty over how much the assets are worth. The most considerable risk the company faces is overpaying for intellectual property, which could lead to lower shareholder returns in future. 

Another dividend share I’d buy

As well as Hipgnosis, I would also buy Direct Line (LSE: DLG). In fact, I already own shares in this insurance company and would not hesitate to acquire more at current levels. 

Insurance can be a tricky business to get right. Correctly pricing insurance policies requires a lot of data, and companies can only really make money if they have economies of scale. 

Direct Line is one of the largest insurance groups in the UK, suggesting it has the economies required to succeed in the business. It is also branching out into other areas such as automotive service centres. The goal of this strategy is to help reduce repair costs for its customers. 

Based on current growth estimates, City analysts believe the stock is trading at a forward price-to-earnings (P/E) multiple of just 11.5. On top of this, the stock offers a dividend yield of 7.8%. This low valuation and high dividend yield are the main reasons I think this company is a no-brainer investment. 

Still, as I noted above, insurance can be a tricky business. As such, there is no guarantee the company will meet its dividend potential. A sharp increase in insurance losses could force management to cut the dividend. That is why this FTSE 250 firm may not be suitable for all investors. But I like it.


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 owns shares of Direct Line Insurance. 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.

More on Investing Articles

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How risky is switching from cash savings to a Stocks and Shares ISA?

The UK government is making moves to encourage cash savers to consider investing via Stocks and Shares ISAs. But what…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

4,985 shares of this FTSE dividend star pay an income equal to the State Pension!

Zaven Boyrazian calculates how many shares investors would have to buy to generate enough income to match the UK State…

Read more »

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

£500 buys me 407 shares in this 8.2%-yielding income stock!

Got a small lump sum? Zaven Boyrazian explores one underappreciated income stock offering an enormous yield that could be set…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Up 23% this year, is it too late to buy shares in this FTSE 100 compounder?

Having missed Diploma shares at £36 back in April, is a strong trading update with higher guidance a good enough…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

Does this ex-penny stock have the potential to almost double?

This under-the-radar mining stock has doubled in the last 12 months, lifting it out of penny stock territory. But could…

Read more »

A mature adult sitting by a fireplace in a living room at home. She is wearing a yellow cardigan and spectacles.
Investing Articles

£5k in savings? Here’s how that can unlock a £255 monthly second income

Ever wondered how to turn a lump sum of savings into a chunky second income? Zaven Boyrazian explains a simple…

Read more »

British pound data
Investing Articles

Get ready for a US stock market crash?

Experts are waving the red flag on the US stock market and economy, warning of an impending crash. Should investors…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

How I’m positioning my SIPP for the AI revolution

Artificial intelligence is likely to disrupt every industry. Edward Sheldon is hoping to capitalise on the growth of AI through…

Read more »