I’ve been hunting for quality dividend stocks to add to my portfolio. For this piece, I’ve created a list of FTSE 250 companies that have paid dividends every year since at least 1994.
From this list, I’ve narrowed down my selection to just three shares. These are stocks that I already own or would be happy to buy today, if I had fresh cash to invest.
Stronger for longer
Industrial group Bodycote (LSE: BOY) specialises in heat treatment. This process adds strength and corrosion-resistance to metal components, such as those used by aircraft and automotive manufacturers.
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There are obviously some cyclical risks to this business. Sales could slow during a major recession. However, Bodycote is a market leader in this sector and has traded successfully through cycles before.
The group’s international footprint and standardised offering appeals to larger customers, and management reported strong demand from aerospace and oil and gas customers last year.
Bodycote’s accounts show attractive double-digit profit margins and the group’s cash generation is generally good, supporting reliable dividend payouts.
The stock currently trades on around 13 times forecast earnings, with a 3.5% dividend yield. I think that could be a good entry point for a long-term investment.
Property recovery
There are lots of ways to play the UK property market, but there are fewer choices for investors who also want to gain exposure to international real estate.
One company that spans almost the whole market is global real estate group Savills (LSE: SVS).
Founded in 1855, Savills has expanded from a London-based agent into an international business serving clients in commercial real estate and high-end residential markets.
Because of its market reach, Savills’ results statements also tend to provide interesting commentary on property market conditions.
In the company’s most recent update, chief executive Mark Ridley said he thought that after a difficult year in 2023, “most markets appear to be past the moment of peak uncertainty”.
Mr Ridley expects to see signs of a broader recovery emerge later this year.
It’s too soon to know if this optimistic view is correct, but the Savills share price is well down from its 2022 highs and looks affordable to me. Broker forecasts suggest a dividend yield of 3.1% for 2024, rising to 3.5% in 2025.
A contrarian choice?
Chemicals group Johnson Matthey (LSE: JMAT) makes most of its profits from catalytic converters for cars, buses and trucks.
This business has fallen out of favour with investors over the last few years, due to concerns about the long-term future of the group’s core clean air business. Some growth projects – such as a planned move into battery technology – have also failed to deliver as hoped.
There are obviously some risks here. But I don’t think demand for catalytic converters will disappear any time soon, especially not for heavy vehicles.
In the meantime, the company is expanding into hydrogen fuel cells – where it has some experience.
Johnson Matthey has been in business for more than 200 years and has adapted to changing technology before. With the stock trading on just 10 times forecast earnings and offering a yield of over 4%, I think the business is starting to look cheap.
