As interest rates look set to fall further in the coming year, trying to earn passive income from cash savings seems less attractive. Stocks and Shares ISAs are looking ever better to me. And quite a few FTSE 250 stocks are catching my attention for their attractive dividends.
Assura (LSE:AGR) is one, with a 7.9% forecast dividend yield. It’s a real estate investment trust (REIT) with a portfolio of leased-out heathcare properties.
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Should you invest £1,000 in Assura Plc right now?
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Price fall halted?
The Assura share price slide of the past five years is painful. But on Monday (17 February), the stock gained 9% in a single day on news of a takeover approach.
US private equity firm Kohlberg Kravis Roberts made overtures regarding a possible cash offer at 48p per share. That’s 23% above the closing price on 14 February.
The board says the offer would “materially undervalue” the company and has rejected it.
Long-term value
Buying a dividend-paying stock only to have it bought out underneath us for cash means we’d be looking for something else to buy pretty quick. But at least we might have more cash to invest if we make a quick profit.
I wouldn’t consider it for that though, as these things have a habit of disappointing. If no deal comes off, I’d expect the share price to fall back. And we could be back to worrying about that long-term price fall again. Any kind of commercial real estate surely still faces uncertainties too.
But this tells me I’m not the only one who thinks a lot of our FTSE 250 REITs like Assura are worth considering now. At least one big US investor appears to agree.
Time for change
Zigup (LSE: ZIG) might not be a name that gets investors’ heads nodding in recognition. But it’s really just the old Redde Northgate which changed its name last year.
The new name for the vehicle rental and fleet management firm is apparently “allied to a refreshed strategic framework under the new pillars of Enable, Deliver and Grow“. I don’t really know what that means. But I do like Zigup’s 8.3% forecast dividend yield.
I’m less impressed by the 16% fall in underlying first-half earnings per share (EPS) the company posted in December. But it did say at the time that its “outlook is unchanged and remains in line with market expectations“.
Covered dividends
Those expectations include a full-year EPS fall, but a return to earnings growth in 2026. We’d be looking at a price-to-earnings ratio of eight for the 2025 year, dropping to seven on 2027 forecasts. And there’s a solid Buy consensus.
Analysts expect further dividend rises, well covered by earnings. The dividend has been growing over the long term, with just a few minor dips. Together, they make me think Zigup has to be worth considering for those wanting to build up a passive income pot.
We’re still in a tough market here with plenty of competition. And a shaky economy could put pressure on business rentals. But I think the signs look good.
