These FTSE 250 shares offer dividend yields comfortably higher than the average for UK shares. Here’s why I’d buy them for my own stocks portfolio this month.
Centamin
Mining for metals is a notoriously unpredictable and expensive business. Profits forecasts for firms like Centamin (LSE:CEY) can crumble if production problems occur that hit revenues and drive up costs.
But I still believe buying gold mining shares like this can be a good idea. This is because they provide investors with protection during economic, political and social crises.
You see, demand for safe-haven assets like gold climb at times like these and prices can often soar. This gives profits at miners like Centamin a boost and can, therefore, reduce falls across an investor’s portfolio.
I think buying this Egypt-focussed company is an especially good idea at the current time. Bullion prices have burst back through the $2,000 per ounce marker and could be on course to print repeated record highs.
But I’d buy Centamin shares today with a view to holding them for the long haul. It is taking steps to boost output at its flagship Sukari mine over the next couple of years. And it has a robust exploration pipeline elsewhere in Africa that could help it supercharge earnings growth.
Today, the precious metals business trades on a forward price-to-earnings (P/E) ratio of just 7.3 times. This — along with its 6.4% dividend yield for 2023 — makes it too cheap to miss, in my opinion.
Pennon Group
Centamin’s large dividend yield comfortably beats the 3.3% average for FTSE 250 shares. And so does that of water supplier Pennon Group (LSE:PNN). The yield here sits at 5.2% for the current financial year to March 2024.
Buying utilities businesses can be excellent ways to make long-term passive income. The defensive nature of their operations provides dependable revenues and cash flows at all points of the economic cycle.
This is why City analysts expect dividends here to keep rising, even as the domestic economy cools. As a result, Pennon’s dividend yield marches to 5.4% for fiscal 2025.
Pennon has one of the most generous payout policies across the water industry. This is thanks to its superior return on regulated equity (RORE) to those of its peers. RORE stood at an impressive 13.1% between April and September, latest financials showed.
This means the business remains committed to raising annual dividends by CPIH (consumer prices index including owner occupiers’ housing costs) plus 2%. Over the long term, this could make a big impact on investors’ passive income.
My chief concern with buying Pennon shares is that it operates in a highly regulated industry. Any changes introduced by Ofwat on issues like dividends or environmental standards could have a huge impact on shareholder returns.
That said, as things stand today, I still believe the company is a great way to make dividend income.
