FTSE 100 stocks for steady income, and the FTSE 250 only for growth? Nonsense. I see some cracking dividend forecasts among mid-cap stocks.
And the FTSE 250 has started rising ahead of the FTSE 100.
It’s too early to tell, but if the smaller index is set to climb ahead in the coming months, buying some of its stocks might give us the best of both worlds.
Here are three of my favourites.
Picking up
Like much of the FTSE 250, abrdn (LSE: ABDN) has been gaining. But I think the chance to get in cheap might still be with us.
Part of the abrdn weakness this year will be down to demotion from the FTSE 100 in August. When that happens, a lot of funds will automatically dump a stock.
My main fear is that the shares might be fully valued. We should see an earnings loss this year. And after a forecast profit return, we could still see price-to-earnings (P/E) ratios above 25 for the next two years.
But if we get the stock market recovery that I expect in the new few years, that could come down.
I think the key might be whether the firm can keep its dividend going, with an 8.1% yield currently forecast.
Safety in diversity
I’d never have a dividend portfolio without including at least one investment trust. I already bought some City of London Investment Trust (LSE: CTY) shares, and I quite like the idea of a top-up.
The dividend yield isn’t the biggest, at just a bit over 5%. But it has to be one of the most reliable in the whole UK stock market.
The trust heads the table of Dividend Heroes, put together by the Association of Investment Companies. It covers trusts that have raised their dividends for at least 20 years in a row.
City of London? It’s managed it for 57 straight years now.
I do wonder if the share price might be in for a weak spell, if investors start to move away from the relative safety of pooled investments.
Still, with Shell, BAE Systems, British American Tobacco, and other top dividend stocks in its top 10 holdings, I think I see a long-term buy.
Falling valuation
ITV (LSE: ITV) is definitely a bit of a speculative one for me. Its fortunes have varied. And so much depends on unpredictable things, like sport and ad revenue.
I also don’t watch television, so maybe I’d be breaking the idea of only buying what I know.
But there’s one thing that might swing me to buy, and that’s the attractive earnings growth forecasts for the next two years.
The forecast 8.1% dividend is good, and expected to stay fairly stable in the next two years. It looks like it might drop a bit next year, but then come back close to 8.5%.
But the real attraction is the P/E. Expected at about 11.5% this year, it could drop as low as seven by 2025.
This might be the riskiest of the three. But the temptation is strong.
