4 FTSE 250 Dividend Greats: AA PLC, Pendragon PLC, Mitie Group PLC & Meggitt plc

Royston Wild analyses the payout potential of AA PLC (LON: AA), Pendragon PLC (LON: PDG), Mitie Group PLC (LON: MTO) and Meggitt plc (LON: MGGT).

| 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.

Today I am looking at the dividend prospects of four FTSE 250 titans.

Get in the fast lane

Motor breakdown play AA (LSE: AA) has seen its customer base steadily erode as the competition has mounted. But a mixture of new product roll-outs and marketing improvements have helped stop the rot recently, while a massive IT overhaul should boost the firm’s cross-selling options and leave it better placed in the digital age.

The City expects AA to shell out a 9.1p per share dividend for the year ending January 2016, yielding a handy, if unspectacular, 3.2%. And payments are expected to accelerate thereafter as earnings explode — indeed, for fiscal 2017 alone a dividend of 10.3p per share is estimated, pushing the yield up to 3.6%.

Dividends driving higher

I believe car dealership Pendragon (LSE: PDG) is also in great shape, as improving consumer spending power blasts demand for ‘big ticket’ items like automobiles. Indeed, February car sales in Britain hit a 12-year high of 83,395, according to the Society of Motor Manufacturers and Traders (SMMT). And this marked an 8.4% rise from the same month in 2015.

Pendragon enjoys the best of both worlds, with exposure to the premium market through brands such as Jaguar and BMW, while showrooms dedicated to badges such as Ford and Vauxhall help to shift volume.

As earnings steadily rise, Pendragon is expected to pay dividends of 1.4p per share in 2016 and 1.5p per share next year, resulting in meaty yields of 3.9% and 4.2% respectively.

A services star

Support services play Mitie Group (LSE: MTO) is a terrific selection for those seeking dependable dividend growth, in my opinion. The business sells a wide array of essential services, from cleaning and catering, to providing fire and security systems, giving the firm splendid earnings visibility, regardless of the wider economic climate.

And Mitie Group’s terrific record of generating contract wins and extensions with blue-chip companies across the globe bodes well for future payout expansion. A dividend of 12.1p per share is projected for 2016, yielding a delicious 4.1%. And this figure moves to 4.4% for 2017 amid expectations of a 12.9p reward.

Payouts set to soar

I am convinced that aerospace giant Meggitt (LSE: MGGT) should also keep delivering market-bashing dividends in the years ahead. The recent establishment of its Customer Service and Support (CSS) division should prove a game-changer in helping to turn around its flagging civil aerospace aftermarket, while rising hardware demand from Western militaries also looks set to drive earnings higher.

And helped by improving cash flows, Meggitt is expected to deliver a 15.3p per share dividend in 2016, resulting in a chunky 3.6% yield. Furthermore, predictions of a 16.3p payout next year nudges the yield to 3.8%.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »