For many, searching the FTSE 250 for dividend stocks might seem like a riskier business than buying FTSE 100 income shares.
Britain’s second-tier index contains a higher proportion of UK-focused companies than the more internationally-flavoured Footsie. The FTSE 250 is therefore in danger of struggling particularly badly as Britain’s economy slows down.
If you know where to look, however, it’s still possible to find rock-solid dividend stocks on the FTSE 250 today. Here are two ultra-cheap stocks I’d happily invest in today. Both carry forward yields above the index’s 2.6% forward average.
Centamin
P/E ratio: 10.5 times
Current dividend yield: 5.7%
It’s my view that gold prices will hit new record highs near $2,100 per ounce later in 2022. I believe that a toxic blend of inflationary pressure, worsening economic indicators and extreme geopolitical tension could spur heavy buying of the safe-haven metal again. In this scenario it’s likely that UK gold stocks like Centamin (LSE: CEY) could soar in value.
I like the idea of always having exposure to gold as an insurance policy. As we saw with Covid-19, crises can come out of the blue that rock financial markets. Precious metals stocks can protect my wealth when broader markets sink, allowing me some peace of mind.
Investing in gold-producing shares would be my favourite way to capitalise on strong metal prices. This is because they enable me to receive income on my investment while also profiting from a potential rise in gold values.
Buying physical gold or a gold-backed financial product (like an ETF) doesn’t provide the added bonus of income.
Finally, I think Centamin’s rock-bottom valuation makes it an exceptional FTSE 250 dividend stock to buy. City analysts think its annual earnings will rise 10% and 14% in 2022 and 2023 respectively. This leaves it trading on a forward P/E ratio just above the bargain-basement benchmark of 10 times.
Hochschild Mining
P/E ratio: 9.4 times
Current dividend yield: 3.3%
Hochschild Mining’s (LSE: HOC) another dirt-cheap precious metals producer I’m considering buying today.
This FTSE 250 business specialises in extracting silver from the ground. This means — like gold stocks — it can expect prices of its product to soar during tough times like these.
However, I also like like the idea of buying Hochschild because of the dual roles that silver performs. The metal is a popular safe haven like gold. But it’s also a major industrial metal and so can rocket in value when economic conditions start to improve. So investing in Hochschild could give me a chance to hedge my bets.
City brokers think the company’s earnings will rise 5% in 2022. And they think profits will soar 24% in 2023 as the world economy bounces back.
Stocks like Hochschild and Centamin can suffer badly if production problems occur. The prices of their metals can also sink if, for example, the US dollar rises in value or bond yields increase.
Still, I think the potential benefits of owning these FTSE 250 dividend stocks outweigh the risks.
