2 FTSE 250 dividend stocks I’d buy and hold until retirement

Royston Wild examines two FTSE 250 (INDEXFTSE: MCX) dividend giants that could make you rich.

| 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.

The market remains quite apathetic towards Britain’s housing market, and that comes as something of a mystery to me.

Look, I’m not blind and can understand how tales of nosediving property values in London are having something of an impact on investor appetite for the likes of Redrow (LSE: RDW). However, while homes demand in the capital may be waning amid accusations of inflated price growth for some decades now, aggregated demand across the country continues to hold up quite well.

While a weakening domestic economy is sapping homebuyer activity to some extent, a combination of low interest rates and the government’s Help To Buy purchasing scheme for first-time buyers is keeping buying activity on the burner.

And for Redrow, a shortage of available properties on the market — created by inadequate decades-old government housing policy and, more recently, a reluctance of existing homeowners to put their homes on the market given current political and economic uncertainty — is still driving demand for its new-builds.

Profits set to keep rising!

A generation of breakneck property price growth may be consigned to history, and this, combined with the pressures created by a rising cost base, is likely to see earnings at Redrow moderate from the colossal rises of previous years.

But this is not to say that profits growth for the FTSE 250 business will grind to a halt. Far from it. Indeed, City brokers are still expecting the construction ace to report earnings expansion of 14% and 9% for the years ending June 2018 and 2019 respectively.

And this, combined with Redrow’s vigorous balance sheet — net debt more than halved in the six months to December, to £35m — is expected to keep dividends rising at quite a pace. Payouts swelled from 1p per share in fiscal 2013 to 17p five years later, and further improvement, to 24.2p in fiscal 2018 and 28.5p next year is forecast by the number crunchers.

Yields for this year subsequently stand at a mountainous 4.1% and 4.8% respectively. While Redrow isn’t without its problems thanks to the tense trading environment, this is more than reflected in its forward P/E ratio of 6.8 times, in my opinion.

Another big yielder

Ashmore Group (LSE: ASHM) is another great buy for income chasers, I believe.

In spite of an anticipated 14% earnings dip in the 12 months to June 2018, the emerging markets asset manager is still predicted to raise the dividend from 16.65p per share last year to 16.9p. And next year, helped by an anticipated 13% profits recovery, Ashmore is expected to raise the dividend again to 17.3p.

Consequently yields clock in at a punchy 4.4% and 4.5% for fiscal 2018 and 2019 respectively.

A prospective P/E rating of 15.8 times for the upcoming fiscal period may be less tasty, but this is a small price to pay given that long-term appetite for stocks with developing market exposure should remain significant and thus keep business activity at Ashmore ticking over — the firm’s latest trading statement showed assets under management booming $7bn during January-March, with net inflows standing at $6.4bn.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

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 »