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1 FTSE 250 dividend share I’d sell and one I’d buy and hold forever

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PZ Cussons (LSE: PZC) has been producing consumer goods for nearly 200 years, and over this period, the company has delivered outstanding returns for its investors. 

But recently, the group has run into some issues and its shares, which were once believed to be one of the safest investments around, have dived. 

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Trading headwinds 

Between mid-June 1998 and September 2013, the shares produced a return for investors of 820%, outperforming the FTSE 250 by staggering 600% over the same period. 

However, since hitting this high water mark, Cussons has struggled to recover. Over the past five years, the stock has underperformed the FTSE 250 by just under 100% excluding dividends. 

So what’s gone wrong? Around 38% of the company’s sales come from Africa, specifically Nigeria, which was booming at the beginning of this decade. Unfortunately, the growth hasn’t lasted, and the country is struggling with economic instability. At the same time, in its home market of the UK and throughout Europe, it is facing more competition from upstart rivals and higher marketing costs that are required to stay ahead of the game. 

It does not look as if these pressures outlined above will alleviate any time soon. In fact, it issued its third profit warning of the year today as trading conditions in the UK and Nigeria have “remained difficult” and “tightened further” within Nigeria in particular. 

The firm now expects profit before tax to come in at the lower end of its £80m to £85m forecast published back in March. And it does not look as if management is expecting a recovery in trading any time soon.

Today’s update warns that “macro conditions will remain challenging” throughout the rest of 2018 and while management is trying to strengthen the group’s portfolio “to better withstand the subdued levels of consumer confidence,” I’m inclined to believe Cussons’ star has further to fall. 

On top of this dour outlook, the shares look expensive. It is currently trading at a forward P/E of 17, which to my mind is far too expensive considering the fact earnings are falling, although my Foolish colleague Peter Stephens seems to disagree

A global trading giant 

It is now on my ‘avoid’ pile, and one company I believe might be a better buy is IG Group (LSE: IGG)

IG has grown over the last 10 years from an upstart into one of the City’s most influential companies. It has also expanded around the world and now offers trading solutions for customers in 17 countries globally. 

Even though the City expects the company’s earnings to fall 14% next year after the introduction of stringent regulations on CFDs come into force, I believe this to be nothing more than a speed bump for the group as it continues to leverage its global presence and trading technology to attract customers. 

In fact, I believe IG could become one of the world’s largest and most recognised financial trading providers in the world over the long term as regulation forces banks out of the business and stymies the growth of smaller companies. Based on this protection, I believe the shares look cheap today, changing hands at only 17 times forward earnings. 

What’s more, the firm has £300m of cash on the balance sheet (9% of its market cap), and the stock supports a dividend yield of 4.5%.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of PZ Cussons. 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.

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