The Motley Fool

Forget the cash ISA! I’d buy these FTSE 250 dividend stocks to protect my savings

Image source: Getty Images.

I don’t know about you, but I’m getting tired of receiving less than 1.5% on my cash savings. Although I believe it’s important to keep a rainy day fund in cash, with inflation at 2.4%, the real spending power of my savings is falling each month.

With such low interest rates, I have no chance of saving for retirement using cash alone. That’s why the majority of my personal savings are invested in dividend stocks. These provide me with a much higher cash income and the possibility of capital gains.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Today I want to look at one dividend stock from my own portfolio and another that’s on my shopping list.

A tasty long-term buy?

Food producer Greencore Group (LSE: GNC) supplies many big retailers with takeaway sandwiches and ready meals. However, the firm’s performance has disappointed investors this year. A profit warning in March was followed by a surprise decision to sell its US business in October.

This strategic shift made me question my bullish stance on the stock. However, the latest figures from the firm have left me feeling fairly confident about the outlook for shareholders.

If we ignore the group’s US operations, which have now been sold, we see that sales in the UK and Ireland rose by 4.2% to £1,498.5m last year. Adjusted operating profit from these sales rose by 1.7% to £104.6m. Profits rose by less than sales, which means that profit margins fell. In this case, the numbers show a fall in operating margin from 7.2% to 7%.

I can live with this, in these circumstances. The group still generated an impressive 15.6% return on invested capital in the UK last year. Over the next few years, my hope is that a tighter focus on the UK business and plans for debt reduction will improve this figure.

Looking ahead, analysts expect Greencore’s adjusted earnings to rise by 5% to 15.8p per share in 2018/19. The dividend is expected to climb 7.5% to 5.99p.

These forecasts put the stock on a 2018/19 price/earnings ratio of 11 with a dividend yield of 3.4%. At this level, I believe the stock could be a good defensive buy for long-term investors.

A 6% stock I already own

One stock I already own is bus and train operator Go-Ahead Group (LSE: GOG). This company has had a lot of bad press as the operator of the troubled Govia Thameslink Railway (GTR) franchise, which includes Southern Rail.

Happily, the firm seems to be moving on from this troubled period. Management said that GTR delivered an “improved operational performance” during the six months to 28 November.

Go-Ahead has also announced a deal with the Department of Transport that will see the firm continue to run the GTR franchise until its 2021 expiry, in return for £15m of investment in “passenger enhancements”.

Overseas growth

Chief executive David Brown hopes to reduce the group’s dependence on the UK market by expanding internationally. Go-Ahead has already won bus and rail contracts in Germany, Singapore and Norway.

Mr Brown expects free cash flow to improve this year and City analysts believe the group’s dividend will be maintained. Consensus forecasts for the current year put the stock on a price/earnings ratio of 10, with a dividend yield of 6.2%.

I rate the shares as a buy.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Roland Head owns shares of Go-Ahead Group. The Motley Fool UK owns shares of and has recommended Greencore. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.