Since 1986, I’ve been investing my own money, sometimes with mixed results. But over the decades, my investing strategy has evolved into a clean and simple approach. Quite simply, I look to buy cheap shares that offer generous dividend yields. And there appear to be plenty of these in the mid-cap FTSE 250 index right now.
Dividend hunting
As a value/dividend/income investor, my goal is to generate returns in two ways. First, from the regular cash dividends companies pay to me as a shareholder. Second, from the capital gains I record by selling shares at a profit in future.
When sifting through the FTSE 250 earlier today, I found more than 60 stocks offering dividend yields of over 5% a year. But almost half of these shares were investment trusts (that is, listed investment funds). Removing these left me with around 30 high-yielding mid-cap stocks.
Four mid-cap movers
Sieving through the remaining mid-cap high-yielding shares, I came across these four stocks. Each offers a yearly dividend yield well above the sub-3.5% on offer from the wider FTSE 250 index. I’ll start with their price action (in A-Z order):
| Company | Bank of Georgia | Close Brothers Group | Intermediate Capital Group | ITV |
| Sector | Banking | Finance | Finance | Media |
| Share price | 2,835p | 1,002p | 1,410.56p | 89.32p |
| 52-week high | 3,015p | 1259p | 1,867p | 111.74p |
| 52-week low | 960p | 872p | 937p | 53.97p |
| Market value | £1.3bn | £1.5bn | £4.1bn | £3.6bn |
Each of these four companies is a large business in its own right, with market values ranging from £1.3bn to £4.1bn. Interestingly, three are financial firms, while the fourth (ITV) is the UK’s leading terrestrial broadcaster.
For the record, I already have a stake in ITV, as my wife bought this stock for our family portfolio in June 2022. This share has already leapt nearly 30% in value since, so we’re pleased with this purchase.
Four high cash yields
Now to review these four shares’ fundamentals, as shown below:
| Company | Bank of Georgia | Close Brothers Group | Intermediate Capital Group | ITV |
| Price/earnings ratio | 2.9 | 9.1 | 12.9 | 7.6 |
| Earnings yield | 34.2% | 11.0% | 7.8% | 13.1% |
| Dividend yield | 7.2% | 6.6% | 5.9% | 5.6% |
| Dividend cover | 4.9 | 1.7 | 1.3 | 2.3 |
My table shows that all four shares offer generous yearly dividend yields, ranging from 5.6% at ITV to 7.2% at Bank of Georgia Holdings. The average cash yield across all four comes to a healthy 6.3% a year. To me, this looks like an attractive cash reward for taking on the risk of owning shares.
What’s more, each of these cash payouts is covered between 1.3 and 4.9 times by earnings. The highest dividend cover — 4.9 times from Bank of Georgia — offers a very wide margin of safety indeed.
So, which of these shares would I buy today? As mentioned, we already own ITV shares, so have no need to buy more just yet. Hence, my pick of these four stocks would be Bank of Georgia. And I know several other Fool writers who share my view. I’ll be looking at it again once the new tax year starts on 6 April.
