The FTSE 250 is full of interesting companies. But not all are worth investing in. Here I’m going to highlight two stocks in the index that City brokers like right now. Both pay dividends and appear to have a lot of potential.
Riding the tech wave
First up is IT specialist Computacenter (LSE: CCC). It currently has buy ratings from a number of brokers including Jefferies, Berenberg, UBS, and Citi. JP Morgan – which has a price target of 3,200p on the stock – has an ‘overweight’ rating (which is similar to a buy).
I’m pretty bullish on this stock myself.
The world is undergoing a huge digital transformation right now and Computacenter is benefitting.
This was illustrated in a recent trading update. Not only did the company advise that it generated 12% revenue growth in 2023 but it also said that it saw record profit before tax.
Looking further ahead, we are excited by the pace of innovation and growth in demand for technology.
Computacenter management
The risk here is that economic weakness could lead to a downturn in tech spending in the near term.
However, with the stock trading on a price-to-earnings (P/E) ratio of just 16 and offering a dividend yield of 2.7%, I think the risk/reward set-up is attractive.
I’m tempted to add it to my portfolio.
Positioned well for the US construction boom
The other FTSE 250 stock I want to highlight is specialist construction contractor Keller Group (LSE: KLR). It currently has buy ratings from Liberum Capital, Jefferies, and Peel Hunt. The latter has a price target of 1,070p – about 23% above the current share price.
Keller appears to be benefitting from infrastructure spending in the US right now.
In an update posted last month, it said that the positive trading momentum and strong operational performance seen in the first nine months of 2023 had continued in the fourth quarter, with a “particularly strong” end to the year.
It also said that underlying operating profit for 2023 would be “significantly ahead” of current market expectations with the underlying operating profit margin for the year expected to be significantly ahead of recent years.
The fundamental strengths of the business, together with the continued positive outlook and our strong order book, give us confidence in further progress in 2024.
Michael Speakman, CEO of Keller Group
Now, construction is a highly cyclical industry. So, there’s no guarantee that the company’s strong recent performance will continue.
However, with the P/E ratio sitting at just 6.5 (less than half the UK average), I think the set-up here is favourable.
A forecast yield of around 4.5% adds weight to the investment case.
If I didn’t already have exposure to the construction industry, I would consider buying this stock.
