Can you afford to miss these chunky dividends from the FTSE 250?

Bilaal Mohamed uncovers three fat dividends from the FTSE 250 (INDEXFTSE:MCX).

| 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’ll be discussing the outlook for utilities giant Pennon Group, civil engineering group Kier, and muti-utility supplier Telecom Plus. Is the chunky dividend income offered by these three FTSE 250 companies simply too good to miss?

Let the dividends flow

Water and waste management firm Pennon Group (LSE: PNN) has performed well this year with its shares gaining 14% over the last 12 months. No doubt, existing stakeholders will be over the moon, but what about new investors, should they be concerned about a higher share price resulting in lower dividend yields? Of course not. The owner of South West Water and waste management business Viridor has been rewarding loyal shareholders with improved dividend payouts since 2007, and I expect this to continue long into the future.

The Exeter-based group is expected to lift the dividend payout to 36.05p per share for the full year to March 2017, compared to the 33.58p paid out last year, with the expectation of a further hike to 38.28p forecast for FY2018. This would leave the shares offering a respectable dividend yield of 4% for this year, followed by an even healthier 4.3% for the year to March 2018. I see Pennon Group as a credible alternative to blue chip peers United Utilities and Severn Trent for those seeking a reliable low-risk progressive dividend.

Best of both

Engineering firm Kier Group (LSE: KIE) saw its share price drop below the £10 level for the first time since 2013 in the aftermath of the Brexit vote, but savvy investors quickly stepped in to scoop up the oversold stock and have pushed the price back up above pre-Brexit levels. So is it too late to buy a slice of the Bedfordshire-based engineering firm, or do the shares offer potential for even further growth?

Kier has yet to announce its results for the year ended last June, but analysts expect the company to reveal a solid 9% rise in full-year earnings, with a further 6% improvement forecast for the year to June 2017. At current levels the shares trade on an attractive valuation with a forward price-to-earnings ratio of 11 for the current financial year, coupled with a tempting dividend yield in excess of 5%. At present levels Kier looks undervalued and provides attractions for both growth investors and income seekers alike.

Progressive dividend

Despite the name, utility supplier Telecom Plus (LSE: TEP) provides a whole range of services to both business and residential customers including gas, electricity, broadband, mobile and of course landline telephony. Revenue and earnings growth has been relentless since the company was founded in 1996, with the share price reaching highs just shy of 2,000p at the end of 2013.

But all good things must come to an end, and although profits have continued to rise in recent years, the pace of growth has slowed to single digits. Today the shares can be snapped up at a more modest 1,060p, and offer a rising dividend yielding approaching 5% at today’s prices. Telecom Plus is certainly worth a closer look for investors seeking a proven track record of reliable dividend growth.

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.

Bilaal Mohamed 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

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »