The UK’s FTSE 250 index of mid-sized companies is my favourite hunting ground for good quality dividend growth stocks. These businesses are often still small enough to grow, but big enough to be profitable and well established – reducing the risk of serious mishaps.
I reckon the recent market shake up has added the opportunities that are on offer. As a long-term investor who’s still adding to their portfolio, I’m excited – not worried – when I see good companies with falling share prices.
In this piece I’m going to look at two FTSE 250 stocks I’ve been buying recently for my own portfolio.
#1: this fintech stock looks too cheap to me
Payment processing specialist PayPoint (LSE: PAY) is a fixture in convenience stores and other small businesses across the UK. I see this business as a fintech, connecting many different payment and voucher systems.
Services provided by the company’s yellow terminals include card processing, top-ups and gift vouchers, government benefit payments, utility bill payments and banking transfers. The company also owns the Collect+ parcel collection and drop-off service.
One downside is that this is quite a complicated business, with lots of moving parts. It’s sometimes hard to follow exactly where the profits are coming from.
However, I’ve been following this business for years and I’m confident that its strong profitability and good cash generation are real. Growth prospects also seem positive, with broker forecasts suggesting earnings could rise by 10% for the year ending March 2026.
PayPoint shares currently trade on just nine times earnings, with a well-supported 6% dividend yield. That looks too cheap to me for a company with profit margins close to 20%.
I’ve been buying recently and would be happy to add more to my portfolio if funds allowed (sadly, they don’t).
#2: an automotive stock that’s safe from US tariffs?
President Trump’s tariffs are causing many car manufacturers sleepless nights at the moment. But my pick from this sector, Inchcape (LSE: INCH), is a little different.
This business operates as a distributor for car manufacturers in countries where they don’t have a large, direct presence. Effectively, Inchcape allows car makers to outsource all of their operations in some areas of the world.
The end result is that Inchcape operates extensively in Asia, Latin America and Europe. But as far as I can see, it doesn’t operate in the USA.
Although some of its clients are US or European car makers, many of them are Chinese firms that are expanding into new markets. They often have no sales in the US and don’t generally depend very heavily on US suppliers for the components they use either.
Of course, tariffs could still end up pushing up car prices globally and contributing to a broader slowdown in sales. Inchcape would likely be affected by this.
However, the company’s financial results from last year suggest to me that it’s in a strong financial position, with reduced debt and good cash generation.
What’s more, Inchcape shares currently trade on less than nine times 2025 forecast earnings, with a useful 4.8% dividend yield.
City analysts expect the company’s earnings growth to accelerate in 2026 – if they’re right, I think Inchcape could be too cheap not to consider at current levels.
