I’ll admit it, I’ve overlooked the FTSE 250 lately. I’ve spent the last few months loading up on dirt-cheap FTSE 100 dividend stocks, but now I’ve had my fill of slow burners. In 2024 I want to see a bit of growth too.
I’ve got just £2k at my disposal but I’ll split it between these two and see how we go. I’ll start with under-valued financial services company Just Group (LSE: JUST). It has a particular focus on later life and retirement income, selling products such as annuities and equity release lifetime mortgages. As the population ages, there’s a growing market for this sort of stuff.
Just the job
The opportunity isn’t reflected in its share price though. It’s fallen 6.46% over the past five years, and trades at a rock bottom valuation of just 4.24 times earnings. The price-to-book ratio is just 0.4.
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Just has a much narrower product focus than FTSE 100 equivalents such as Aviva and Legal & General Group, which has made it more turbulent.
Yet as JP Morgan recently pointed out, it’s “clearly punching above its weight” in the fast-growing UK pension risk transfer market, where it has a 10% market share. It has also benefited from the annuity resurgence, as interest rates finally give retirees a better return.
Just had a terrific first half, with sales more than doubling to £1.9bn year-on-year, and adjusted pre-tax profit of £246m, compared to prior loss of £185m. The stock is stirring into life, up 13.97% over the last month. The 12-month return is 16.77%.
Peak interest rates could puncture the annuity boom. At the same time, they could revive equity release sales. Just resumed dividend payments in 2021 at 1p per share. In 2022 it paid 1.73p. The forecast yield of 2.3% is covered 13.2 times earnings. I’d buy it hoping for both rising dividends and share price growth.
For the first time in ages, I’m excited by dear old WH Smith (LSE: SMWH). I landed in Oslo airport recently and was surprised to see the familiar brand beaming at me in arrivals. The two outlets were selling the usual array of snacks and drinks, along with Norwegian magazines and newspapers. It’s repeating the format all over the world.
Global player
Now could be a particularly good time to buy the stock, as the travel market recovers. The WH Smith share price has fallen 32.03% over five years and 5.32% over 12 months, but now it’s showing signs of life. It’s up 10.2% in the last month.
On 6 September, the board reported strong trading at both its airport and train station locations, up 42% as the impact of the Omicron variant fell out of the figures. ‘Rest of World’ travel sales led the way, up 98%, as Smiths added 30 new stores. This compensated for weak sales at its 532 UK high street outlets.
As WH Smith opens more global stores sales should rise further, and it has the whole world to aim at. This will shrink its exposure it its ailing UK business. The stock is pricier than I’d like trading at 17 times earnings, and the yield is on the low side at 2.2% (albeit with cover of 2.7). However, I think its growth outlook is strong for 2024 and beyond.
