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2 FTSE 250 dividend stocks I’d buy for my ISA

There are some great dividend stocks in the mid-cap FTSE 250 index. In many cases, these companies have more scope for long-term earnings and payout growth than some of the mature behemoths of the FTSE 100. This makes them ideal stocks to tuck away in an ISA, in my view, as both capital gains and dividends are protected from the taxman.

With time running out to make the most of the current year’s ISA allowance, two FTSE 250 dividend stocks I’d be happy to buy right now are transport provider National Express  (LSE: NEX) and gold miner Centamin  (LSE: CEY). I believe both stocks are trading at attractive valuations, and could make for highly rewarding long-term investments.

Driving growth

National Express continues to thrive under the stewardship of chief executive Dean Finch. Revenue has advanced at a compound annual growth rate (CAGR) of 5.3% over the last five years. Profit before tax and earnings per share — at CAGRs of 8.9% — have increased faster than revenue, and have supported dividend growth of a similar order (8.2%). These are all signs of a healthy, growing business.

This increasingly diversified international group now generates over 75% of its revenue from outside the UK, compared with around 60% five years ago. Every division accelerated revenue growth in the second half of 2018, and made strategic acquisitions or undertook complementary market expansion. Management was able to hail not only “record results,” but also “growing momentum.”

City analysts have pencilled-in annual EPS growth in mid-single digits for 2019 and 2020. However, I wouldn’t be surprised to see upgrades to these forecasts as time goes on, because further strategic acquisitions are highly likely. Even in the absence of upgrades, I view a rating of 12.2 times the current forecast for 2019 earnings as undemanding, and a prospective initial dividend yield of 3.8% as highly attractive.

Gold and miner

I believe it’s a good idea for investors to have some exposure to gold. When the gold price is below its previous highs, as it currently is, I’d be happy to buy shares in ETFS Physical Gold. This offers a simple, cost-efficient way to gain exposure to the yellow metal.

However, I also believe now could be a great time to pick up some shares in miner Centamin. The company offers something that physical gold doesn’t. Its policy is to pay out “at least 30%” of its net free cash flow in dividends.

Bright outlook

I see particular value in Centamin at the moment. I believe operational challenges in 2018, and guidance of a relatively modest increase in production in 2019 (and higher costs), have depressed the share price to a level that doesn’t reflect a bright longer-term outlook.

I think probably another disappointment was the 2018 dividend. While the payout of $63m (5.5 cents a share), represented 100% of net free cash flow, some analysts and investors were expecting the board to top up the dividend by dipping into the company’s cash pile of $283m.

Nevertheless, I reckon Centamin is now an attractive investment proposition on a rating of 19.8 times analysts’ current-year earnings forecasts, with a prospective yield matching National Express’s 3.8%. Earnings and dividend growth in excess of 20% pencilled-in for 2020 add to the appeal.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.