The FTSE 100 is a popular hunting ground for investors seeking a passive income stream in retirement. However, there are also some terrific income stocks in the FTSE 250. In fact, in terms of their dividend records, some of them out-blue-chip their FTSE 100 peers.
Three stocks from the FTSE 250 I’d happily buy for a retirement portfolio are Primary Health Properties (LSE: PHP), Close Brothers (LSE: CBG) and NextEnergy Solar (LSE: NESF). Let me explain why I believe these stocks are highly attractive for income seekers.
Clean bill of health
Primary Health Properties (£1.5bn market cap) has increased its dividend each and every year for the last 22 years. This is a superb record, and actually puts many FTSE 100 companies to shame.
The group owns primary health facilities in the UK and Republic of Ireland. The majority are GP surgeries, with other properties let to NHS organisations, pharmacies and dentists. Long-term leases, most income backed by government, and high occupancy rates are features of the business. These features go a long way to explaining why PHP has been able to build such an impressive dividend record, and why it has every prospect of continuing to deliver a reliable rising income in the future.
The company pays dividends quarterly, in February, May, August and November. At a share price of 131p, with the next four payouts forecast to total 5.7p, the prospective first-year yield is 4.35%.
A bank to bank on
Close Brothers (£1.9bn market cap) is a leading UK merchant bank. It has built a well-deserved reputation as a prudently-managed business. Notably, it was able to maintain its dividend through the financial crisis when other banks were slashing or suspending their payouts.
The firm’s record makes it one of the few banks I’d be happy to buy and hold for income at any point in the economic cycle. Indeed, its dividend yield is particularly attractive at the present time, due to Brexit worry weakness in shares across the banking sector.
Close Brothers pays an interim dividend in April and a final dividend in November, the final one generally being around double the interim. I’ve cautiously pencilled in 43p for the next final and 22p for the following interim. At a share price of 1,257p, the 65p total gives investors a prospective first-year yield of 5.17%.
Sunny money
Investing in renewable energy infrastructure has moved into the mainstream in recent years. Widespread public and political support for a cleaner future, and technological advances, have made this an attractive area to invest in. NextEnergy Solar (£700m market cap) is an investment company that meets this demand.
It joined the stock market in 2014, and has built up a portfolio of 87 solar power plants on agricultural, industrial and commercial sites. The majority are in the UK, but it’s also acquired eight in Italy. Its aim is to increase its annual dividend by UK RPI inflation, and it’s done this each year since its flotation.
Dividends are paid quarterly in September, December, March and June. The board is targeting a payout of 6.87p for the upcoming four quarters, giving investors today, at a share price of 120.5p, a prospective first-year yield of 5.7%.
In my opinion, Primary Health, Close and NextEnergy are worthy candidates for inclusion in a diverse portfolio of income stocks. The average yield of the three is just over 5%.
