It’s going to be March next week, which means a new month to find investing opportunities. I always try to get a head start each month. I work out how much free cash I’ll have over the next four-and-a-bit-weeks to invest, along with what I think the topic theme could be. At the moment, I’m anticipating having £500, which I want to put to work in hot dividend stocks. Here are two options I’m considering.
Shopping around for deals
The first is Moneysupermarket.com Group (LSE:MONY). The main website offers a price comparison service to users on a broad range of financial products. The company also owns MoneySavingExpert.com, a famous site that include tips on how to manage expenses and find the best deals.
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It currently has a dividend yield of 6.04%, making it one of the highest-yielding dividend stocks in the FTSE 250. The share price is down 32% over the last year. In the latest full-year results just released, the business kept the dividend per share unchanged at 11.71p. This is interesting as revenue and profitability actually fell last year. Yet the decision to keep the same payout amount shows that it values income investors and wants to keep them onboard.
Results were softer in 2021, with revenue down 8% on the prior year and adjusted EBITDA down 7%. This was mostly driven by the fall in travel and home services. This isn’t surprising, given the lockdowns over the past year. However, the Money arm (ie cards) did show growth. Looking forward, I think that Money can continue to grow, and travel and home services should rebound in 2022 as people get out more.
One risk to this dividend stock is in the Energy sector. Lower wholesale prices are needed to provide product availability. Current high prices will negatively impact revenue.
A growing dividend stock
The second stock I might buy is IG Group (LSE:IGG). The retail trading platform is also a member of the FTSE 250 index, with a dividend yield at the moment of 5.56%. Over the past year the share price has fallen by 2%.
I like the business model for several reasons. First, it’s continuing to branch out into new areas, something that’ll help to diversify and grow revenues in the future. This has come from external acquisitions such as tastytrade, and from internal moves such as pushing into Japan. Second, it’s a fairly low-risk model. It makes a small commission when clients buy and sell. As long as it maintains a strong platform and can retain customers, revenue should follow.
One risk is that as retail investing has become more popular in recent years, so has the competition. Fellow FTSE 250 constituents CMC Markets and Plus500 are just two players vying for the same customers as IG, with little to differentiate them. However, for the moment it appears IG is doing well in this regard, with active client numbers jumping 42% in the half-year results compared to the previous six months. Some of this is due to the tastytrade acquisition, but some is natural growth.
I’m considering putting my £500 to work split between both dividend stocks.