2 FTSE 250 dividend champions I’d buy for my retirement today

These FTSE 250 (INDEXFTSE: MCX) stocks are volatile in the short term, but I’ve got my long-term eye on them for boosting my pension.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investing in asset management companies like Jupiter Fund Management (LSE: JUP) can lead you on a rocky ride, as they often tend to be more volatile than the underlying stock markets in which they invest.

When markets are strong, funds flow in, share prices rise… and when markets are weak, folks withdraw their cash, and share prices drop. But I reckon that volatility can work to the advantage of those of us investing long term for our retirement.

FTSE 250 constituent Jupiter has just released first-half figures, and they’re dominated by a net funds outflow of £1.1bn, though that is a significant slowdown from an outflow of £2.3bn in the first half of 2018 and £4.6bn for the full year. And to put it into perspective, assets under management still amounted to £45.9bn at 30 June.

Profit Dip

Pre-tax profit for the period dropped 16% with EPS down 13%, and the interim dividend was held at a well-covered 7.9p per share. The firm’s operating margin moved up to 47% (from 43% at 31 December), and that looks pretty healthy.

Jupiter Fund Management is one that I think those with a short-term view should avoid, as share price spikes like 2017’s followed by 2018’s slump are, I think, reasonably likely to repeat. But I see it as a good one for those who like to top up at intervals over the course of an investment horizon of a decade or more.

I’d be tempted to dip in whenever the P/E was below the long-term FTSE 100 average of around 14 (as it is now). At the beginning of 2019, Jupiter shares could be had on a P/E of under 10, and I suggested at the time that “when markets are down, that’s the time to be investing more rather than selling out.” The price is up 31% since then.

Top buy?

Right now, I think Investec (LSE: INVP) is one of the best buys in the asset management business. Again, the share price shows volatility. Though Investec is itself in the FTSE 250, I prefer to compare with the FTSE 100, as the world’s biggest indices tend to account for the lion’s share of top asset managers’ holdings.

On that comparison, Investec’s shares have outperformed the Footsie over the past five years when the index has been up, and have underperformed when the index has been down. It certainly looks like one where you’d have done well to buy when the Investec price line fell below the FTSE 100’s.

On actual valuation terms, slowing but still positive earnings growth coupled with a share price that’s been falling since a peak in March 2018, have seen Investec’s forecast P/E decline to 8.6. That’s for the year to March 2020, and a stronger predicted EPS the following year would drop the P/E even lower, to under eight.

Bags of cash

If that’s not enough, Investec’s dividends have been gently progressive in cash terms, with yields gaining strongly on the recent share price weakness. Expected yields are up above 5% now, and around 2.3 times covered by prospective earnings.

In May, my colleague Rupert Hargreaves described Investec as a “dirt-cheap FTSE 250 income champion,” pointing to its global investment strategy as a key strength. I think he was right then, and even more right now.

I’m investing long-term for my retirement, and these are both firmly on my shortlist.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft 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.

More on Retirement Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

I’d try to grow a £100K SIPP by 9% annually doing this!

Our writer thinks a slow and steady approach could help him build the value of his SIPP dramatically. Here he…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

£8k in savings? Here’s how I’d aim to retire with a second income of £1,000 a month!

This Fool is considering a strategy to secure a second income from a small pool of savings. With the right…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

£30k in savings? Here’s how I’d aim to turn that into a second income of £15k

Here’s how I’d aim to invest in stocks and shares to generate a decent second income worth having in retirement…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

2 UK shares that could help set up a SIPP for decades!

Our writer explains the long-term appeal he sees in one British share he already owns in his SIPP -- and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Here’s how I’m aiming to become a Stocks and Shares ISA millionaire!

I'm confident that a regular investment in FTSE 100 and FTSE 250 shares could supercharge the size of my Stocks…

Read more »

Investing Articles

3 top tactics that ISA millionaires use to strike it rich!

Ever wondered how ISA millionaires manage to make such enormous wealth? Here, Royston Wild divulges some of their greatest strategies.

Read more »

Investing Articles

Can a Stocks and Shares ISA help me retire early?

This Fool is confident that using his Stocks and Shares ISA will allow him to give up work early. Here…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Cash vs Stocks and Shares ISAs: here’s where I’m investing in 2024!

Cash and Stocks and Shares ISAs are both excellent products for the modern saver and investor. But which is the…

Read more »