2 FTSE 250 stocks I’d buy today and hold forever

I think these two FTSE 250 stocks can provide a combination of growth and income for decades. And they look good value to me.

| 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.

As long ago as November 2019, I was going on about how defensive I thought FTSE 250 defence and security engineer QinetiQ Group (LSE: QQ) was in the looming face of Brexit. I was apologising for the pun too, and I echo that again.

After that, the share price kept on rising too, and it looked like I might have picked a good one. But that came to an abrupt end in February when Covid-19 arrived. In 2020 so far, QinetiQ shares are down 22%, in line with the FTSE 250. But how is business actually doing?

According to a first-half trading update Wednesday, the company enjoyed a strong second-half performance. The firm said “Our focus on recovery delivered good revenue and profit performance during the second quarter resulting in us finishing close to our original targets, despite Covid-19 impact in the first quarter“.

Dividends are back

Cash performance was also described as strong, and QinetiQ says it is now focusing on driving sustainable growth. The company suspended its 2019 final dividend when the lockdown began. But it’s really only been delayed, as QinetiQ is set to pay an extra 4.4p dividend as a replacement.

QinetiQ shares are now on forward price-to-earnings multiples of around 14, which is approaching the FTSE 250 average. It’s a company with defensive investment characteristics, a record of solid cash generation, and what I see as excellent long-term dividend prospects. I rate it a buy, at a bargain price today.

FTSE 250 winner

Investment firm 3i Infrastructure (LSE: 3IN) is unusual among FTSE 250 stocks in 2020. Its share price has held up. Well, it’s down 2% since the start of the year, which is perhaps not technically winning. But compared to an index that has lost a fifth of its value, I say it’s a winner.

3i puts its cash in infrastructure assets, and its performance in this Covid-19 year looks resilient. I’m really not surprised the shares have trounced the FTSE 250 so far.

In an interim update Wednesday, the company said: “Most portfolio companies have met or exceeded the expectations we set at the start of the period“.

Some valuations will still suffer from the pandemic effects. But total portfolio income and non-income cash reached £47m, not far down from £57m in the same period last year. Liquidity looks very strong, with a cash balance of £361m at 29 September. The firm also still has its full revolving credit facility of £300m available.

Income attraction

I’m looking for dividends, and 3i’s has been progressive in recent years. The company says it is on track to pay its planned 9.8p per share, for a rise of 6.5% on last year. For a FTSE 250 growth stock, that’s impressive.

We have an investment firm concentrating on what I think are attractive assets. It’s generating cash strongly, and its dividends are growing faster than inflation. The forecast yield for this year stands at 3.4%. There are bigger ones out there, but the strongly progressive outlook for 3i’s dividend attracts me. I’d buy.

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 Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »