The FTSE 250 is home to many high-yield dividend stocks that can generate attractive levels of passive income. Here’s a pair that I’d snap up for my Stocks and Shares ISA with spare cash today.
Vital infrastructure
The first mid-cap stock is BBGI Global Infrastructure (LSE: BBGI). This is an investment company that owns and manages infrastructure projects, primarily through public-private partnerships.
BBGI’s portfolio of 56 assets includes motorways, bridges, healthcare facilities, and schools across Europe, Australia, and North America. These projects generate stable income that is government-backed and inflation-linked.
| Top 10 portfolio investments | Weighting |
|---|---|
| Golden Ears Bridge (Canada) | 11% |
| Ohio River Bridges (US) | 10% |
| A7 Motorway (Germany) | 4% |
| Northern Territory Secure Facilities (Australia) | 4% |
| A1/A6 Motorway (Netherlands) | 4% |
| Victorian Correctional Facilities (Australia) | 4% |
| Liverpool & Sefton Clinics (UK) | 3% |
| M1 Westlink (UK) | 3% |
| Women’s College Hospital (Canada) | 3% |
| Poplar Affordable Housing & Recreation Centres (UK) | 3% |
| Remaining investments | 51% |
The forward dividend yield currently stands at a market-beating 6.5%. And this year’s dividend is well-covered at around 1.4 times cash flows.
One risk here is a spike in inflation, which could derail the expected lowering of interest rates. This would be negative for both the funding of new projects and sentiment towards BBGI shares.
However, I’m encouraged that the company is in a very strong financial position. At the end of June, it had no long-term debt at group level and net cash of £20.6m.
Looking ahead, management estimates the portfolio could continue to generate a progressive dividend for the next 15 years, without any further acquisitions.
With BBGI trading at a 12% discount to net asset value (NAV), the stock looks like a long-term bargain to me. It’s historically traded at a premium, and the share price remains 27% off its all-time high from 2022.
GP landlord
My second pick is Assura (LSE: AGR). This is a healthcare real estate investment trust (REIT) that owns 625 properties, mainly GP surgeries and other medical establishments.
These locations are primarily rented out to the NHS, which provides a recurring and predictable revenue stream. The company also recently acquired 14 private hospitals for £500m. With the NHS system “broken” (according to the government), there is surging demand for private health services in the UK.
However, one concern I have is that Assura had net debt of £1.5bn at the end of September. High levels of debt aren’t uncommon for REITs, but its weighted average interest rate on debt increased from 2.3% to 3% this year. So the high-rate environment continues to be a challenge.
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On balance though, I like the stock. Demand for healthcare facilities is expanding due to a UK population that is both ageing and growing rapidly.
As CEO Jonathan Murphy recently pointed out: “The UK healthcare crisis is getting more severe by the year, which in turn is driving increased demand for healthcare infrastructure. The requirement for investment in this space has received cross-party political support.”
The dividend yield is 8.2%. But with interest rates expected to fall, REITs could become more attractive, driving up share prices. This means the ultra-high yield might not last long.
Targeting £1k a year in passive income
Dividends aren’t guaranteed to be paid, of course, but I reckon these two are solid options. Combined, they’d offer an average yield of 7.35%.
This means I’d need to split approximately £13,610 between these two stocks for £1,000 a year in passive income. That would leave me nearly £6,500 of my annual ISA allowance to buy other dividend stocks.
