While the FTSE 100 is the dominant UK stock market index, investors shouldn’t ignore the FTSE 250. This index, which contains the largest 250 stocks on the London Stock Exchange outside the FTSE 100, is home to some great companies.
Here, I’m going to highlight two FTSE 250 stocks I think are worth buying right now. I believe these stocks have the potential to provide investors with both attractive long-term gains as well as a nice stream of dividends.
A FTSE 250 technology stock
The first I want to highlight is Computacenter (LSE: CCC), a leading provider of computer services to businesses and government organisations.
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The reason I’m bullish on this particular stock is that ‘digital transformation’ is likely to be a dominant theme in the years ahead. If there’s been one takeaway from Covid-19 for businesses, it’s that they need to be fully digitalised in order to be competitive.
As a result of Covid-19, many companies are now investing heavily in technology associated with cloud computing (so employees can work remotely), data analytics, and cybersecurity. And that can only benefit IT companies such as Computacenter.
Computacenter posted an encouraging update in December. It said the positive trading it had experienced in the second and third quarters of the year had continued into the fourth quarter. As a result, it upgraded its profit outlook. Another trading statement is expected tomorrow. I expect this update to be good as well.
CCC currently trades on a forward-looking P/E ratio of about 20. The prospective dividend yield is around 2%. I see this valuation and yield as very attractive, given the long-term growth potential here. I’d buy the stock today.
A play on the UK property market
Another FTSE 250 stock I believe looks quite attractive right now is Howden Joinery (LSE: HWDN). It’s a leading supplier of fitted kitchens (to trade customers) that has over 730 depots across the UK.
The reason I’m bullish here is that, over the last 12 months, Britons have saved a record amount of money in lockdown. In the second quarter of last year, for example, deposits in UK bank accounts surged by a massive £45bn. I can see a lot of this money going into home renovations in the years ahead. Howden Joinery should benefit. Meanwhile, in the long run, Britons’ obsession with real estate should keep demand for Howden’s products high.
Recent trading updates from Howden Joinery have been very positive. In December, for example, the company advised that revenue for November was up 19%. Meanwhile, last week, it said recent trading has been stronger than anticipated with good profit and cash performances. These updates suggest demand for new kitchens from UK homeowners is already elevated.
Howden Joinery shares currently trade on a forward-looking P/E ratio of 21.6. The prospective dividend yield is about 1.7%. At that valuation, I see the FTSE 250 stock as a buy.
