The FTSE 250 index has some decent, dividend-paying companies in its ranks and I’m often drawn to it when picking stocks. Often the underlying businesses are big and well-established, which means they are on par with many of the enterprises in the larger FTSE 100 index.
Indeed, many FTSE 250 firms keep growing and eventually end up in the FTSE 100 index. I think the following two firms are attractive and offer some diversification between sectors.
Infrastructure
HICL Infrastructure (LSE: HICL), as its name suggests, invests in infrastructure projects and businesses. The firm’s portfolio includes public-private partnerships, regulated and demand-based infrastructure. Some 117 investments are spread across countries such as the UK, Australia, Canada, France, Ireland and the Netherlands. We are talking about things such as schools, hospitals, roads, rail and facilities for the fire and police services.
I reckon the sector is likely to be steady in the years to come and one of the main things I like about the share is the dividend yield, which is running close to 5% with the share price at 157p. The firm has a good record of raising the payment a little each year.
In May, the directors said in the annual report that despite the current political and regulatory uncertainty in the UK infrastructure market, they think the company’s business model will deliver further returns for shareholders in the coming years. Right now, you can pick up a few of the shares on a price-to-earnings (P/E) ratio around 11 and a price-to-book rating near one, which strikes me as fair value.
Engineering and manufacturing
IMI (LSE: IMI) is a specialist engineering company that designs, manufactures and services products for controlling the movement of fluids. The firm works with industrial customers in “high-growth” sectors such as energy, transportation and infrastructure. It has manufacturing facilities in more than 20 countries and operates a global service network.
I find the dividend yield running near 4% to be attractive and the firm has a good record of raising it a little each year. There is a strong focus on quality and the directors are aiming for excellence in the execution of the company’s operations. I reckon such an approach could drive further returns for shareholders in the years to come.
This summer, a new chief executive is due to get his feet under the desk in the top office. I think a change at the head of any business can be a positive thing, often marking the start of new drive and determination in the board room, which could serve shareholders well.
With the share price at 1,032p, the P/E rating is running around 14. I don’t think the valuation is excessive given the quality of the enterprise. I’d be happy to add both of these shares to a diversified portfolio because of their dividend-paying credentials and growth potential.
