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3 cheap FTSE 250 dividend-growth stocks I’d buy after last week’s slump

Will the market sell-off continue in the week ahead, or is the worst over for now? There’s no way to be sure. In situations like this, I think the best thing for us to do is to focus on finding good, cheap stocks that could help us build a market-beating portfolio.

On Friday, I considered three potential picks from the FTSE 100. Today I want to continue my search in the mid-cap FTSE 250 index.

Banish Brexit with overseas growth

Recruitment group Hays (LSE: HAS) is the biggest UK-listed firm in this sector, with a market cap of £2.3bn. It generates roughly one quarter of its fees in the UK, but also operates abroad in markets including Australia and Germany.

Hays’ share price has fallen by almost 25% since the start of October. I suspect this sell-off may have gone too far. A trading update on 11 October showed that UK and Ireland fees rose by 3% during the three months to 30 September, despite Brexit fears slowing hiring.

Net fees for the group rose by 9% on a like-for-like basis during the quarter, compared to 10% last year. That seems fairly reassuring to me.

Brokers also seem confident. Earnings are expected to rise by about 10% in 2019. I reckon the stock’s 2018/19 forecast P/E of 12.4 and 4.2% dividend yield suggest a buying opportunity.

A half-price retail buy?

Shares in fashion retailer Superdry (LSE: SDRY) have fallen by almost 50% so far this year. That’s a surprisingly big drop, given that the company is continuing to deliver profitable growth.

What’s gone wrong? The departure of co-founder Julian Dunkerton spooked some investors. More seriously, sales growth in Superdry stores has come under pressure. This has been a drag on profit growth from faster-growing online sales.

The company has responded by cutting planned expenditure on new owned stores. It will focus on online and wholesale channels instead.

Profit expectations have slipped lower, but City analysts still expect the firm to report a 12% increase in earnings in 2018/19. At around 1,000p, the shares trade on a forecast P/E of 9.4, with a prospective yield of 3.7%. With net cash of £75m and stable profit margins, I think Superdry deserves a buy rating.

A one-way bet on the USA?

888 Holdings (LSE: 888) was one of the first companies to get involved in the US market six years ago, when sports betting was legalised in Nevada. It’s now operating in partnership with local firms in all three US states where sports betting has been legalised.

Many more states are expected to follow and 888 seems well positioned to expand in this market. This growth channel should help to offset slowing markets like the UK, where sales fell by 18% to $87m during the first half of the year.

Group sales were almost unchanged during the six-month period, up by 1% to $273.2m. Despite this flat performance, reduced marketing spend helped lift adjusted pre-tax profit for the half-year by 13% to $42.5m.

Analysts expect full-year adjusted earnings to be flat at $0.20 per share, putting the stock on a forecast P/E of 12. A return to growth is expected in 2019. In the meantime, shareholders are receiving a 6% dividend yield.

For investors who don’t mind investing in sin stocks, I think 888 could be a decent buy at this level.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Superdry. 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.