2 FTSE 350 income shares I’d buy with £1,000 right now

These FTSE 350 (INDEXFTSE:NMX) stocks offer a potent mix of growth and income potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Finding shares that offer a mix of income potential and capital growth prospects is never easy. What makes it more difficult at the present time is the fact that the FTSE 350 has risen by 20% in the last year. Therefore, valuations are higher, margins of safety are narrower and capital gain potential is more limited. Despite this, there are numerous stocks which could be worth buying for the long term. Here are two prime examples.

Sound strategy

Reporting on Tuesday was specialist insurer Hiscox (LSE: HSX). The company’s update was rather mixed, with parts of its business performing well and others less so. However, its decision to invest heavily in retail operations seems to be paying off. Hiscox Retail reported a rise in gross written premiums of 29.7%. This was aided by strong performance in the US, Europe and in its Special Risks segment. In the UK and Ireland, Hiscox Retail reported a 13.9% rise in gross written premiums, which was a strong result given difficult operating conditions.

Progress, however, was offset to some degree by the performance of Hiscox’s London Market segment. While disappointing on a relative basis, its increase in gross written premiums was 0.4%. As such, the decision to invest in its Retail operations seems to be paying off, while a disciplined approach to its slower-growth markets should ensure they do not act as a major drag on its future financial and share price performance.

With a dividend yield of 2.5% which is covered 2.3 times by profit, Hiscox appears to be a relatively enticing income stock for the long term. Its bottom line is due to rise by 9% in the next financial year, which makes its price-to-earnings growth (PEG) ratio of 1.7 appear fair. As such, its long-term total returns could be relatively impressive even with the FTSE 350 trading at historically high levels.

Growth potential

Also offering scope for a higher dividend in future years is transaction specialist Paypoint (LSE: PAY). It currently yields 4.7% from a dividend which is covered over 1.3 times by profit. Alongside earnings growth forecasts of 6% in each of the next two financial years, this suggests an inflation-beating rate of dividend growth could be ahead for the business.

Furthermore, Paypoint continues to offer value for money even after its 22% share price gain during the course of the last year. It has a price-to-earnings (P/E) ratio of 15.8, which suggests there may be upward re-rating potential.

One catalyst to do so could be the tailwind the company is set to experience over the medium term. With the payments industry becoming increasingly digital and consumers demanding faster, more secure and easier methods of payment, there are likely to be growth opportunities for Paypoint in future years. As such, now could be the perfect time to buy it ahead of a potentially more profitable period.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of PayPoint. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »