3 dirt-cheap FTSE 250 dividend shares I’d buy right now

Looking around the FTSE 250, I’m seeing so many dividend shares that I think are crazy cheap. Here are three I have on my 2022 ISA shortlist.

| 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.

I think the best time to buy dividend shares is when market valuations are out of line with the long-term potential of cash generative companies. Right now, that is exactly what I see with a number of FTSE 250 shares. Here are three that I have on my buy list.

Invest in investment itself

The Jupiter Fund Management (LSE: JUP) share price has dropped 25% over the past 12 months, compared to a decline of just 4% for the FTSE 250. The company reported a net outflow of £3.8bn for 2021, so I think the fall is understandable.

But Jupiter still had £60.5bn in assets under management, and boosted its 2021 net management fees by 18%. The ordinary dividend was held at 17.1p per share, with the 2020 special payment of 3p not repeated. Forecasts suggest the same again for 2022, which would yield 8.4% on the current share price.

The danger is that investors will continue to withdraw funds during 2022, in response to the growing world economic crisis. In fact, I think it’s probably inevitable.

But we’re looking at a trailing P/E of only 6.5 now. And with the 2021 dividend having been covered 1.85 times by earnings, I rate Jupiter Fund Management a buy for my ISA.

Fat insurance dividends

The whole financial sector tends to suffer during economic squeezes. FTSE 250 insurer Direct Line (LSE: DLG) is no exception, with its shares down 14% over 12 months.

But that’s helped push up the forecast dividend yield, which now stands at 8.8%. I don’t know how long that level of payment will hold out, as it is barely covered by earnings. And those earnings have dipped over the past three years.

But Direct Line reported a strong capital position for the end of 2021. And in addition to lifting its final dividend, the company embarked on a further £100m share buyback programme.

The 2021 adjusted solvency capital ratio came in at a healthy 160%, even after dividends and share buyback.

Direct Line’s success appears to be down to its investment in improving its technology platforms, which it reckons boost its competitiveness. CEO Penny James told us that “we believe there is plenty more to come in 2022.

Biggest FTSE 250 faller

Of my three FTSE 250 picks today, Synthomer (LSE: SYNT) shares have fallen the furthest. The price is down 40% over the past 12 months. The five-year picture is similar, despite the company having posted strong earnings growth over that period.

Synthomer is clearly suffering from a pandemic effect withdrawal. The company makes nitrile gloves and related health and hygiene products (among a wider portfolio). So it was hot stuff while Covid-19 was at its worst, with investor demand cooling off now.

But the company said: “Exceptional levels of profitability in 2021 have enabled the group to make major inorganic and organic investments to significantly strengthen our platform for future growth.

I suspect the Synthomer share price will continue to underperform as growth investors seek their excitement elsewhere. But I can see sustainable dividend yields of around 5-6%, based on the current share price. I might get me some of that.

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 considered so you should consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Jupiter Fund Management and Synthomer. 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I invest in the FTSE 100 – or try to beat it?

Our writer has the option of investing in a FTSE 100 tracker fund. So why does he choose to buy…

Read more »

Young black woman walking in Central London for shopping
Investing Articles

£1,500 to invest in a Stocks and Shares ISA? Here’s how I’d do it

Our writer has been investing in his Stocks and Shares ISA. Here he details how he could put £1,500 in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

2 top FTSE 100 shares I’d buy before the market rebounds!

Christopher Ruane identifies a pair of FTSE 100 shares that have both tumbled in the past year and that he…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Here’s why the next bull market may have already begun

The UK stock market has taken the Bank of England's interest rate hike in its stride and green shoots suggest…

Read more »

Gold medal
Investing Articles

No contest! Here’s my stock of the week

An update from this company offered some relief from the economic gloom. It's this Fool's stock of the week.

Read more »

Cogs turning against each other
Investing Articles

Scottish Mortgage shares are back on the rise: is now the time to jump onboard?

Scottish Mortgage shares have risen over 25% in the past 30 days. This Fool takes a look at why and…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Why do Lloyds shares seem so cheap?

Lloyds shares have been losing ground and now look cheap on some valuations. So why has our writer removed the…

Read more »

Investing Articles

How to invest in shares to help beat inflation

Soaring prices could well outstrip our investing returns this year. I think it's more important to find shares to beat…

Read more »