The London Stock Exchange is filled with plenty of lucrative opportunities to unlock a second income stream. And one that currently stands out among the FTSE 250 is Victrex (LSE:VCT), offering an enormous 8.6% dividend yield. That’s almost three times the 3.3% payout offered by the FTSE 250. And by spending just over £5,700, investors can snap up 840 shares, adding £500 to their passive income.
The question now becomes, is Victrex a good investment? Or is it a trap that could destroy wealth instead of creating it?
Investigating the risk
Let’s start by digging into some of the problems Victrex currently faces. A big reason why the company’s offering such a high payout is due to the share price tumbling 35% since the start of 2025.
Victrex has been struggling through a few operational setbacks lately. Polymer production volumes have firmly underperformed expectations, particularly in China, where its new factory is now only expected to produce 50 tonnes of material versus the original target of 200 tonnes.
At the same time, while the company has successfully attracted new customers to its business, not many of these have been after the group’s premium product offerings. Subsequently, the group’s average selling price has suffered, and profit margins are experiencing greater pressure, ultimately resulting in profit warnings and institutional investor downgrades.
Pairing all this with mounting global trade tensions and geopolitical risks that could disrupt supply chains, it’s not surprising to see investors grow more cautious.
However, with the weak sentiment now seemingly already baked into its share price, could the stock secretly be a bargain?
The optimist’s case
While Victrex is undoubtedly dealing with a challenging environment, there are still some encouraging signs of long-term potential. The firm operates in a relatively unique niche with relatively low levels of competition despite the critical nature of its polymer products. After all, they’re used across the aerospace, healthcare, electronics, and energy industries.
The initial launch of its new China facility has certainly been underwhelming. But it’s still expected to deliver a 15% saving to production costs, allowing management to reduce the pressure on profitability even among its non-premium offerings.
As such, the latest analyst forecasts project that earnings should rebound in 2026, provided no more spanners are thrown into the works. And combining this upcoming expected recovery with a weakened share price could open the door to lucrative dividends and capital gains over the next 12-24 months.
The bottom line
All things considered, Victrex appears to be a high-risk, high-reward investment story in 2025. If management can restore profit margins and demand from both healthcare and aerospace customers is restored, buying shares today could be lucrative in the long run. However, the company has made quite a few stumbles of late. So I’m personally keeping it on my watchlist for now. If the group can show more encouraging signs that a turnaround is under way, then taking a closer look could be warranted.
