I invest mostly in FTSE 100 dividend stocks, but I keep thinking I might be missing out on some FTSE 250 gems.
The smaller stock market index has outstripped the bigger one over the decades. But after falling back in the past couple of years, it might just be ready to outperform again. And when we’re building up a passive income pot, it’s total returns that matter.
So, if I didn’t already hold long-term income stocks in my Stocks and Shares ISA, or if I had a lot more cash, I might very well buy the following five FTSE 250 stocks.
The investment business
If individual stocks do well in the long term, companies that handle other people’s investments for them should do well too, right?
That’s where abrdn (LSE: ABDN) comes in. It’s an investment manager, previously known as Standard Life Aberdeen.
Its shares have taken a pounding in the past five years, and there’s both a good side and a bad side to that.
The good is that the forecast dividend yield is up to 9.2% now, thanks to the falling price. The bad is that it suggests investment management firms will do worse than the market in a downturn.
Still, over the very long term, the UK stock market has had far more good times than bad times. And abrdn could do even better than the market in the good times.
Property stability
I reckon the UK’s chronic housing shortage should keep property profitable in the long term. We’ve seen the dangers of the past few years. But again, if we have more ups than downs…
I’d be tempted by two stocks related to property. One is house builder Crest Nicholson, with its 7.3% dividend yield. There is the possibility of a cut if the market stays subdued longer than expected.
The other is Primary Health Properties. As the name suggests, it owns and lets out healthcare properties, like GP clinics.
It’s open to property market risk. But against that, it still gets its rents. And right now, they look set to provide a 7.5% dividend yield.
Energy
Energy is another long-term essential. And I mostly expect fossil fuel business to pay the dividends today, with renewable energy a bit of a ‘jam tomorrow’ thing.
And Greencoat UK Wind is down for a loss this year. But analysts see profit next year, and a 7.5% dividend yield. So there’s a bit of tomorrow there, but it’s not very tomorrow… if you get what I mean.
Finally, I don’t think I could resist ITV and its 6.5% dividend yield. With a lot of revenue coming from adverstising, it’s very sensitive to the economy and to retail market hardship. And we’ve had that in the past few years.
But revenue is picking up, and analysts expect the share price to follow.
FTSE 250 for 2024?
The more I look at FTSE 250 stocks like these, the more I think we could see better long-term total returns from them at today’s cheap prices.
I think my focus could well be on mid-cap stocks for the rest of this year.
