The idea that the FTSE 100‘s for income stocks and the FTSE 250‘s for growth stocks is based on a line that’s increasingly blurring.
There’s only room for 100 stocks in the top index. But there are far bigger numbers that are capable of providing rising long-term dividend income.
Banking returns
The Investec Group (LSE: INVP) share price has had a great few years. It’s up 22% in the past 12 months alone. Confidence, it seems, is returning to the bank sector.
But even after those strong few years, the forecast dividend yield still stands at a nice 6%.
But then it gets better, as analyst forecasts show the cash rising in the next few years. If they’re right, Investec dividends could climb by 28% between 2024 and 2027.
What’s the catch? Well, one risk is that earnings look likely to drop in the 2024-25 year, before they start to pick up again from 2026.
The bank sector still faces risk too. And I think share prices might still stay weak until interest rates come down a fair bit more.
But the specialist bank and wealth manager’s on a forecast price-to-earnings (P/E) ratio of only about eight, dropping below seven by 2027. I’d say that gives it a fair bit of safety margin.
It’s got to be one for dividend investors to consider, surely.
Pet profits
Pets At Home Group (LSE: PETS) could be set for an even bigger dividend rise over the same timescale.
In this case, the share price hasn’t had such a good ride. But we’re still looking at a pretty decent 4.2% dividend predicted for this year.
But more importantly, the City experts think we could see a 33% rise from 2024 to 2027. Now, dividends are never guaranteed, and forecast ones are even less certain. But that’s a very nice gain, in my book.
There’s one possible cloud on the horizon though. The Competition and Markets Authority’s looking into suspicions of overcharging on the vet business, and it could cover Pets At Home.
But I think I see some strong growth potential here. And a P/E dropping to 11 by 2027 looks low for a growth stock to me, especially in such a long-term attractive market.
The company seems to agree, and is buying back a load of its own shares right now.
Mid-cap dividends
Those are just two FTSE 250 stocks where I see dividend growth. But I have my eye on others that offer some tempting yields.
I think this is a great time to consider buying real estate investment trusts (REITs). The share prices of many of them have been punished. And that’s even ones that don’t rely on asset values for the cash that pays their dividends.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
I’m thinking of Primary Health Properties, with a forward yield of 7.2%, British Land and its 5.7% yield, and Assura up at 8%, among others.
All have their risks, which investors need to check. But yields like that make good starting points.
