The Motley Fool

Forget the top cash ISA rate. I’m collecting 10% from this FTSE 250 dividend stock

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.

Image source: Getty Images.

When Bovis Homes Group (LSE: BVS) chief executive Greg Fitzgerald spent £139,000 buying Bovis stock at the end of November, he probably wasn’t thinking about cash ISA interest rates.

I suspect Mr Fitzgerald was motivated more by the knowledge that shares in the company he runs were priced to give an 11.4% dividend yield at that time. The Bovis share price has recovered somewhat since then and the forecast yield on the stock has fallen to 10.4%.

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...

Trading figures released today make it clear that for 2018 at least, this yield is very real and will be delivered. At a time when the best easy access cash ISA rate is just 1.45%, I think it’s worth considering the income potential of dividend stocks.

That’s certainly what I’ve done in my own portfolio, which includes some Bovis shares. Today I want to explain why I remain a buyer of this housebuilder. I’ll also highlight another 10% dividend stock I own.

Ahead of expectations

Brexit was dominating the headlines on Wednesday morning, but the only comment from Bovis was that the resulting uncertainty had slowed sales of its larger homes. To address this — and the risk of a wider slowdown — the company is increasing its focus on sales to housing associations.

The firm’s figures for 2018 certainly seem impressive. Profits for the year are expected to hit a record high and be “slightly ahead” of market forecasts. The number of homes built rose by 3% to 3,759 and the group’s HBF customer satisfaction rating has increased from 2 star to 4 star.

Bovis will pay a total dividend of 102p per share for 2018, giving a yield of 10.4% at the last-seen price of 980p. But it’s worth noting that 45p of this is a special dividend, which may not be repeated in future years.

However, the group’s ordinary dividend alone still provides an attractive yield of 5.8% and is less likely to be cut, unless profits really collapse. I think Bovis is one of the best buys in the housing sector.

A 10% buy-and-hold stock?

Bovis isn’t the only 10% yielder in my portfolio. I also own shares of payment processing group PayPoint (LSE: PAY). This company’s main business is providing payment processing services to convenience stores and corner shops.

Historically, the firm’s focus was on allowing customers to make cash payments for bills such as utilities and mobile phone top-ups. But the group is expanding its services. Its newest systems also handle tasks such as parcel drop-offs, card transactions and stock management.

The company’s equipment is now installed in more than 28,800 shops in the UK, and its Collect+ parcel drop-off service is now available at more than 7,000 sites. As far as I can see, PayPoint doesn’t have any direct competitors in the UK.

The firm’s business model doesn’t require high levels of investment and can easily be scaled to add new customers. These characteristics have helped to make this a very profitable business, with strong cash generation.

The current forecast dividend yield of 10% is made up of a mix of ordinary and special dividends. I believe the total payout could fall as the firm nears the end of a period of cash returns. But I estimate that a yield of 7%-8% should be supportable. I may buy more of this stock.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Roland Head owns shares of Bovis Homes Group and PayPoint. The Motley Fool UK owns shares of PayPoint. 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.