2 FTSE 250 dividend stocks I’d buy for my ISA with £2,000 right now

Here are two overlooked FTSE 250 (INDEXFTSE:MCX) stocks which could be just right for a long-term ISA investment.

| 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.

Shares in Moneysupermarket.com Group (LSE: MONY) slumped in February when the company predicted a pause in its recently impressive earnings growth.

A 4% rise in revenue which gave a 7% boost to earnings per share was a little behind forecasts, but what scared investors away was the revelation that “adjusted EBITDA for 2018 is expected to be broadly flat before growth resumes from 2019 onwards.

Moneysupermarket shares are down 20% so far in 2018, though we have seen a bit of an uptick over the past month. Does this mean the earlier promise for long-term growth is falling away, or is it just the typical pause that happens when early growth spurts start to slow? 

I go for the latter myself, and I think we’re looking at something relatively rare in a growth stock — one that was quick to turn its growth into decent dividends. Yields in the 3%-4% range are pretty respectable at this stage, especially as the annual cash payment was boosted by more than 40% between 2013 and 2017.

Acquisition

The market reacted coolly Thursday, when the company told us it “has agreed to acquire Decision Technologies Limited (‘Decision Tech’), a leading home communications and mobile phone comparison business, for £40m.

Decision Tech has its own consumer comparison offerings, including broadbandchoices.co.uk, but it also provides comparison tools for communications services as used by Moneysavingexpert.com among others. Moneysupermarket reckons that Decision Tech “has one of the most advanced and scalable B2B comparison offerings in the UK.

The share price barely moved as a result, but I see this as a good move. And I see the Moneysupermarket.com share price weakness as a buying opportunity.

Retail bargain

I’ve been looking at another falling stock lately, which I’m also thinking could make an attractive dividend target for this year’s ISA allowance. 

It’s the unloved Halfords (LSE: HFD), in the even-less-loved retail sector. The Halfords share price has been erratic as its EPS has bobbed up and down over the past few years, and a few false starts have left it pretty much flat overall over the past five years.

But the company has kept its dividends rising progressively, and as the share price has been stagnating so has the yield been growing. Last year provided an attractive 4.9%, and analysts have 5.5% indicated for the current year, rising to 6% by 2020.

Dependable yield?

That’s very tempting if it really is sustainable, and I don’t see any good reason to think it isn’t. Full-year results are not due until 22 May, but January’s third-quarter update looked good. We saw a 3.2% rise in revenue on the quarter, with year-to-date revenue up 3.6%. Like-for-like figures are more indicative of the underlying business, and those looked healthy too — quarterly revenue up 2.7%, and 1.9% year to date.

With the retail sector being hit by the growth of online selling, it’s reassuring to see Halfords enjoying a 13% growth in online sales. Interestingly, more than 80% of Halfords.com orders were collected in-store, reinforcing my belief that the omnichannel model is very much alive and well.

Dividend cover is a little weaker than it has been, but looking back to interim results released November, I see no cause for concern. Net debt stood at £84.8m, but that represented only 0.8 times underlying EBITDA, and doesn’t look at all stretching to me.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »