The Motley Fool

2 FTSE 250 growth plus dividend shares I’d put in my ISA today

The failure of Carillion dealt a blow to investors in the infrastructure industry, but I see bargains in the sector — and I think 3i Infrastructure (LSE: 3IN), a closed-ended infrastructure investment company, is one of them.

Currently focused on Europe, North America and Asia, 3i aims to extend its portfolio worldwide. At the halfway stage this year, the company said it’s on track to meet its targets. As of 27 September, there was a cash balance of £17m on the books, though 3i has drawn £192m of its revolving credit facility, with £108m undrawn.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Dividends from growth

Even though the strategy is to expand by acquisition, 3i already offers a progressive dividend. The 9.2p per share planned for the full year to 31 March is on track, with the firm’s portfolio generating good income — portfolio income and non-income cash came to £57m in the first half.

I am a little concerned with 3i’s expressed intent to deliver a sustainable total return of 8-10% per annum. It’s not that I don’t like that kind of profit, but I don’t like companies saying so up front.

In my experience, when a company fails to achieve a stated target one year (which almost always happens), growth investors tend to jump ship in great numbers and the share price can tank.

Still, we’re looking at a P/E of only around nine, and the progressive dividend is offering a modest but attractive yield of a little over 3%. With its long-term strategy, I reckon 3i is an attractive FTSE 250 ISA candidate.

Depressed sector

In International Public Partnerships (LSE: INPP), we’re looking at another closed-ended investment firm, this time targeting a chunk of its funds at public-private partnership projects covering Europe and North America.

IPP shares are on a higher valuation, with a P/E multiple of around 16. Dividends are higher too, though, with 2018 providing a 4.6% yield. And they’re also progressive

For the first half, the company told us its investments “continued to generate strong operational cash flows,” leading to a 2.2% rise in net asset value per share (NAV) and lending support to a 3.59p interim dividend. With NAV at 150.3p, the stock is trading at only a slight premium on a 154p share price as I write, and I really don’t see that as demanding.

Cracking returns

Since IPO, IPP has generated an average annualised rate of 8.2% in total shareholder returns, which is a very healthy record. Being towards the bottom of 3i’s targeted 8-10% range, I think it adds extra support for my thought that that company is perhaps being a little too ambitious.

On the expansion front, International Public Partnerships has just completed a new equity issue which raised £116.5m gross, expanded beyond initial intentions due to significant over-subscription. The cash will be used to pay down borrowings used for the company’s recent acquisitions, boosting its “strong position to pursue the pipeline of opportunities identified in the UK and overseas.

IPP is is another FTSE 250 stock that’s just made it on to my ISA watch list.

High-Yield Hidden Star?

Discover the name of a Top Income Share with a juicy 7% forecast dividend yield that has got our Motley Fool UK analyst champing at the bit!

Find out why he thinks “the stock’s current weakness may offer us the chance to buy a proven dividend performer at what could be a bargain price”.

Click here to claim your copy of this special report now — free of charge!

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.