The FTSE 100 gets a lot of attention. But there are some well-established businesses in the FTSE 250 I think could turn out to be good investments for me. Here are two that currently pay dividends. I have added both to my portfolio this week.
ITV
Broadcaster ITV (LSE: ITV) has adapted over the years as its market has changed. Terrestrial television is far less popular than it once was. But it is still a large and lucrative business, even if there is a risk that it will continue to get smaller over time.
Meanwhile, ITV has become a significant force on the production side of things. No matter how content is broadcast, making a drama series will still need studios, technical expertise and talent.
That is why I remain upbeat about the future for ITV, which last year reported growth in both revenues and profits. In the longer term, the profit picture has been sliding, with last year’s post-tax profits of £388m around 18% lower than they had been in 2019.
But those are still sizeable earnings, at over £1m a day. I reckon ITV can do well as a business in future, but it looks priced for decline. The shares sell for pennies and the price-to-earnings ratio is less than five.
Along with a dividend yield of 4.6%, that makes these FTSE 250 shares attractive to me. That is why I have bought them for my portfolio.
Direct Line
Insurer Direct Line (LSE: DLG) needs little introduction for many. I reckon that is good news from an investing perspective, helping the brand make it easier to attract and retain clients.
That still looks like a bit of a challenge at the moment though. In the first quarter, policies in force were 8.7% less than at the same stage a year before. Meanwhile, cost inflation is hurting the profitability of motor insurance operations at the moment, with the company warning last month about the impact of the rising cost of settling claims.
This FTSE 250 share is 30% cheaper
So both revenues and profits could fall at the firm this year. But Direct Line has said it is “confident in the sustainability of its regular dividends”. In reality though, dividends are never guaranteed. That helps explain why the Direct Line share price has fallen 32% in the past year.
That has pushed the dividend up to a very attractive 11.3%. Although the business faces risks, I think its brand, experience and existing base of more than 13m policies in force are key strengths. I have used the share price tumble as an opportunity to scoop up an attractive dividend for my portfolio.
