In this piece, I’m going to look at two FTSE 250 shares that offer dividend yields of at least 8%. Investing £50,000 in these two stocks could potentially generate a yearly income of over £4,000, based on prices on 7 February.
A specialised business
Asset manager Ashmore (LSE: ASHM) is a £1.5bn business that specialises in emerging market debt and equity investments. It’s run by founder Mark Coombs, who remains a 31% shareholder.
Unlike many general UK equity funds, I don’t think Ashmore’s actively managed offering can be easily replicated by cheap index tracker funds. I think this should help to give the business a durable long-term business model.
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Despite my confidence, Ashmore hasn’t performed very well in recent years. The shares are down by around 50% over five years and profits have also slumped.
I think we may now be close to the bottom for this business. Ashmore’s results for the six months to 31 December showed pre-tax profit rising by 38% to £74.5m, compared to the same period one year earlier.
The increase was driven by higher interest income, which helped to offset lower fee income from a drop in assets under management.
Ashmore says that the investment performance of its funds has remained stable, with 62% of assets under management outperforming the market over the last five years.
This performance hasn’t yet attracted an influx of new clients. But Coombs thinks that clients will return when they see the opportunities on offer.
Of course, there’s a risk that this won’t happen. Investors may continue to prefer the simpler, cheaper options available elsewhere.
I can’t be sure. But this business currently has more than £650m of surplus capital. So far, Coombs has maintained the dividend, giving an 8% yield.
I think Ashmore offers an attractive mix of risk and reward at current levels, given the potential for a recovery.
A 9% income?
The second company I want to look at is Tritax EuroBox (LSE: EBOX). This property business owns logistics warehouses in Europe. It’s a sister company to the better-known UK-focused Tritax BigBox.
The EuroBox share price has fallen as investors have worried about falling property prices, rising interest rates, and an increase in empty units. These concerns are valid, of course, but I think the sell-off has been overdone.
Last year’s results show EuroBox maintaining full cover for its dividend, despite an increase in vacancy rates to 5.5%.
More recently, the company confirmed that it had agreed a five-year lease on a brand-new building close to Sweden’s busiest airport. Together with a recent letting in Italy, this has reduced EuroBox’s vacancy rate to 4.3%
Property values were hit by rising interest rates last year. EuroBox’s net asset value fell by 26% to €1.02 per share. There’s a risk of further falls, but the company says that it’s starting to see market prices stabilising.
My feeling is that the worst is now over. I think demand for modern warehouses across Europe is likely to remain stable, unless there’s a major global recession.
EuroBox shares are currently trading 50% below book value, with a dividend yield of nearly 9%. I think they’re probably too cheap at this level.
