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2 FTSE 250 dividend stocks with yields over 4% I’d buy in my ISA today

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While the FTSE 250 may have a yield of around 3% at present, it’s possible to generate a significantly higher income return from a number of its members.

Certainly, in some cases, this may mean taking on additional risks versus buying larger and better-diversified FTSE 100 income shares.

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However, with the potential to generate capital growth alongside a 4%-plus income return, these two mid-cap shares could offer impressive prospects.

PZ Cussons

Consumer goods company PZ Cussons (LSE: PZC) has experienced a hugely difficult time over recent years. The main reason for this is a challenging economic performance in Nigeria, which is a major market for the company’s products. This has impacted negatively on demand, and has acted as a drag on the overall performance of the business. In fact, over the last four years, the company has reported a falling bottom line in each year.

Looking ahead though, PZ Cussons is expected to post a rise in earnings of 9% in the next financial year. Since it trades on a price-to-earnings growth (PEG) ratio of 1.8, it could certainly offer good value for money.

A rising bottom line may mean the company is able to increase dividend payments in the future. It currently yields around 4.5%, but with dividends due to be covered 1.7 times by profit next year, it would be unsurprising for a rapid rate of dividend growth ahead.

Therefore, while there’s a risk the company will experience further difficulties in some of its key markets, its strong range of brands and improving financial outlook may mean it offers impressive total return potential.

Card Factory

The performance of retailer Card Factory (LSE: CARD) has been mixed, with its share price volatile and its bottom line declining over the last two years. This isn’t a major surprise, given the difficult operating conditions that have been present in the UK during the period.

Looking ahead, consumer confidence could weaken further. Brexit may yet include a number of twists and turns that cause consumers to become increasingly price conscious. This could impact negatively on sales for a variety of retailers, while also hurting margins.

Card Factory, though, is forecast to post a rise in earnings of 4% in the current year. Since it trades on a price-to-earnings (P/E) ratio of around 10.5, it seems to offer good value for money. In fact, investors may have priced in many of the potential challenges it faces over the medium term.

With the company having a dividend yield of around 9%, it also offers around three times the income return of the wider index. Although it may lack the defensive appeal and resilience of fellow high-yielding shares across the FTSE 100 and the FTSE 250, it could deliver an improving total return as its profitability moves higher.

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Peter Stephens owns shares of Card Factory. The Motley Fool UK owns shares of Card Factory and PZ Cussons. 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.

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