The FTSE 250 doesn’t get as much attention as its older sibling, the FTSE 100 — but maybe it should. Over the past two decades, the mid-cap index has comfortably outperformed the UK’s blue-chip benchmark. It’s a diverse mix of companies that are typically further along than early-stage growth stocks, but still small enough to offer exciting growth potential.
Naturally, investing in mid-cap stocks comes with extra risk, as they can be more sensitive to economic headwinds than global giants. But for long-term investors willing to do the research, the index offers plenty of compelling opportunities.
Some shares could even turn a £10,000 investment into £20,000 — or more — over the next 10 years.
Here are three that I think are worth considering.
Primary Health Properties
Primary Health Properties (LSE: PHP) is a real estate investment trust (REIT) focused on modern, purpose-built healthcare facilities – many of which are leased long term to NHS tenants. That makes its income about as reliable as it gets in the REIT space.
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The dividend yield currently sits around 7%, and with compounding via reinvestment, a £10,000 investment could grow to roughly £22,000 over a decade. What’s more, dividends have grown consistently at an average of 3.5% annually, providing a nice cushion against inflation.
There are a few red flags, though. The shares look expensive with a price-to-earnings (P/E) ratio of 30, and the dividend payout ratio is worryingly high. If earnings falter, the dividend could be vulnerable. Still, its defensive sector and government-backed income streams are hard to ignore.
Spectris
Spectris (LSE: SXS) makes precision instrumentation and controls used in high-tech industrial settings. It’s a name that doesn’t often trend. But quietly, this FTSE 250 firm has been making long-term shareholders very happy. Over the past three decades, Spectris has delivered triple-digit gains each decade — and then some.
Despite its strong track record, it still trades at a price-to-earnings growth (PEG) ratio of just 0.26, suggesting it could be undervalued relative to its growth prospects. Operating margins are high, and return on equity sits close to 18%.
The dividend yield is modest, but payments have grown for 19 straight years and remain well covered by earnings. Risks include a slowdown in industrial demand or underperformance in key end markets. But for a steady growth stock with a quality track record, it’s one I’d keep an eye on.
OSB Group
OSB Group (LSE: OSB) is one of the UK’s best-kept secrets in financial services, combining growth with generous dividends. Over the past decade, the share price has climbed 90% and it currently yields 6%. If the same growth and yield held for the next 10 years (which isn’t guaranteed), it could turn £10k into £28,200.
However, the business is heavily exposed to the specialist mortgage market. If house prices tumble or bad debts spike, profits could take a hit. Its debt load is already quite high – almost double its equity – so a dip in profit could shift priorities away from dividends.
Importantly, the payout ratio is a manageable 43%, giving it plenty of headroom. That valuation also looks compelling: a P/E ratio of just 7.4 and a price-to-book (P/B) ratio below 1.
