Forget the cash ISA! These FTSE 250 dividend stocks will protect your savings much more effectively

Royston Wild runs the rule over two top FTSE 250 (INDEXFTSE: MCX) dividend stocks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

At the top of the month I tipped PageGroup (LSE: PAGE) ahead of its third-quarter trading numbers. Its share price may have failed to detonate following the release, but there was still plenty of positive information for us to get our teeth into. For example, group gross profit boomed 19.7% (at stable exchange rates) to £207.7m between July and September, the highest quarterly rate of growth for seven years.

Outstanding profits growth

In the article mentioned at the start of this piece, I specifically outlined the impressive progress that PageGroup is making in overseas territories. And I’m delighted to say in its core Europe, Middle East and Africa (EMEA) region — responsible for around 46% of group gross profits — the recruiter’s bottom line swelled by 20.9% at constant currencies in Q3.

Growth on a comparable basis in the Americas swelled by a jaw-dropping 30.1% year-on-year, while performance in its second-largest region of Asia Pacific couldn’t be described as sluggish either, profits here having jumped 27.7%. It even continues to perform resiliently at home despite continued uncertainty related to Brexit, and its UK division actually returned to growth during July-September with gross profits rising 0.8%.

Should you invest £1,000 in British American Tobacco right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British American Tobacco made the list?

See the 6 stocks

And as a result of its all-round strength, PageGroup said that it expects operating profit for the full year “to be marginally ahead of consensus.”

While broker estimates have remained unchanged in the immediate aftermath of these fresh trading numbers, with earnings rises of 17% predicted for both 2018 and 2019, these forecasts are likely to receive a shot in the arm. PageGroup’s a hot buy right now and a low forward PEG reading bang on the bargain benchmark of 1 adds extra appeal.

5% dividend yields

It wouldn’t be a stretch to expect dividend predictions to be upgraded either, given the strength of PageGroup’s balance sheet (net cash, pre-dividends, bubbled to £122m as of September from £87m a year earlier). But at the moment the number crunchers are anticipating payouts of 26.3p and 29.2p per share for this year and next respectively, projections that still create monster yields of 4.8% and 5.4%.

Needless to say, I believe buying PageGroup is a better investment decision than sticking your money in a cash ISA given the paltry interest rates on offer from such products.

Another top FTSE 250 share that would be a better bet than a cash account is Unite Group (LSE: UTG), as Britain’s resilience as a go-to destination for students across the world makes the business a likely cert to deliver strong profits growth to shareholders too. Just last week the firm lauded the “continued strong demand for high quality student accommodation” here in the UK. 

Dividends have ballooned at Unite in recent years and, supported by predictions of profits growth of 15% and 13% in 2018 and 2019 respectively, City brokers expect payouts to keep climbing. The 28.6p per share payment predicted for this year would mark a significant upgrade from last year’s 22.7p, and it yields a chunky 3.3%. The dial moves to 3.9% for 2019 thanks to an expected 33.3p dividend too.

At current prices, Unite sports a prospective P/E ratio of 24.8 times. Toppy on paper, no doubt. But given the chances of strong and sustained profits, and thus dividend, growth, it’s still a terrific pick in my opinion.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s how a 40-year-old could start investing £100 per week to retire early

If a 40-year-old decides to start investing today, here's how they could potentially turn £100 a week into over £500k…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

The FTSE 100 is up 60% in 5 years. Here’s why — and a big lesson!

The flagship FTSE 100 index has put in a very strong performance over five years. There's a specific reason for…

Read more »

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »