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Forget Lloyd’s! I’d buy this FTSE 250 dividend share instead

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In the past six months, the Lloyd’s (LSE: LLOY) share price has taken a battering, losing around 9%.

Being focused on the domestic market has caused some problems for the bank, with the uncertainty in respect of Brexit causing particular pain. Add larger than expected PPI claims into the mix, and it’s easy to see why the share price has dipped.

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I have real concerns with Lloyd’s. Although macroeconomic woes are not isolated to the UK, from a banking stock I would rather have the benefit of international diversity. In addition, the industry is under threat from new entrants like Revolut, which could disrupt and turn the banking world on its head.

The FTSE 100 company is trading at a price-to-earnings ratio of 10, and has a prospective dividend yield of 5%.

This might get some investors excited and tempt them to buy shares in Lloyd’s, but I’ve found a FTSE 250 stock that offers a lower P/E ratio and higher dividend.

Marston’s

Marston’s (LSE: MARS) latest results are due to be released on 27 November. I have a suspicion that there could be reasons for investors to pop the fizz.

As it stands, the pub operator and independent brewers P/E ratio is 9, and its prospective dividend yield is an impressive 6%.

In the previous six months, its price has surged by 20%, in part because of the takeover of rival Greene King by CKA.

Going forward, the company is focused on reducing its debt pile. This is encouraging and I believe it will be fundamental to Marston’s success.

The brewer hopes to accelerate a stated debt reduction target of £200m by 2023 through the disposal of non-core assets. In an update released in October, it increased its disposals guidance from £40m to £70m in 2020. In November, it announced it had reached an agreement for the disposal of 137 pubs to Admiral Taverns for £44.9m.

CEO Ralph Findlay believes these measures will mean that Marston’s will thereafter be “operating a high-quality business generating consistent net cash flow, after dividends, of at least £50m per annum.”

With an estate of over 1,500 pubs nationally, comprising managed, franchised, and leased pubs, it’s easy to imagine that there is room to carry out a disposal exercise.

There is further encouragement for investors in the sales numbers. Total pub sales for the year increased by 3%, with like-for-like sales growth of 0.8%. Most exciting, however, is that in the final 10 weeks of the financial year, like-for-like sales were up 1.9%. Hopefully, this continues onwards throughout the festive season.

Growth investors should probably look elsewhere. But for dividend hunters, I would be encouraged by the disposal program, which will hopefully mean Marston’s have the strength to continue with its generous payout in the long-term.

In a struggling leisure industry, I think Marston’s could make up one of the stand-out shares.

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The Motley Fool UK has recommended Lloyds Banking Group. 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.