I think it’s time to be greedy with these 2 FTSE 250 dividend growth stocks

After recent declines, these high-growth FTSE 250 stocks look highly appealing for long-term investors, says this Fool.

| 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.

The recent market volatility has shaken investor confidence. However, long-term investors shouldn’t focus on the market’s near-term declines. Instead, investors with a multi-decade investment horizon should use this opportunity to snap up shares of high-quality companies that have fallen on hard times.

With that in mind, here are two FTSE 250 dividend growth stocks that look attractive after big falls.

Dart Group

Dart Group (LSE: DTG) is one of the FTSE 250’s top growth stocks. Or it was before the COVID-19 outbreak slammed travel stocks. Shares in the owner of the Jet2 holiday brand have plunged on concerns about the impact the epidemic will have on sales.

So far, Dart hasn’t published any guidance on this matter. But other companies have. These forecasts suggest Dart’s losses could reach into the tens of millions of pounds, although that’s just a rough forecast at this stage.

Still, investors should look past Dart’s current issues and focus on its long-run potential. Jet2 is a trusted and successful holiday brand. The vast majority of the holidaymakers that book with the business return to use the service again.

That’s one of the reasons why the company has achieved earnings growth averaging 30% per year for the past six years. The dividend to shareholders has grown at a similar rate. Therefore, while the business might have to deal with the travel disruption for the next few weeks or months, customers are highly likely to return.

More importantly, Dart has the resources to weather the storm. Its last trading update showed the company had a net cash balance of £455m.

Therefore, now could be a great time to snap up a share in this dividend growth champion at a discounted price. It’s currently dealing at a price-to-earnings (P/E) multiple of just 10.7, which looks cheap compared to the firm’s historical earnings growth rate.

Greggs

Another FTSE 250 dividend growth stock that has recently appeared on my radar is high street baker Greggs (LSE: GRG). Unfortunately, after a solid start to the year, February’s stormy weather hit the business hard.

According to Greggs’ most recent trading update, sales increased at a double-digit percentage year-on-year in January. Then growth collapsed in February. The flooding of a bakery in Cardiff, which forced the closure of 40 stores, didn’t help matters. 

Again, looking past these short-term headwinds, the group’s long-term outlook is exciting. The company has achieved earnings growth of 22% per annum since 2013. There’s no reason why this cannot continue going forward.

The dividend has grown at a compound annual rate of 13% during this time frame. After recent declines, the stocks dividend yield has spiked to 2.4%.

Meanwhile, shares in Greggs are dealing at a P/E of 24.7. That might seem expensive, but it could be a price worth paying for this dividend growth champion as it continues to dominate the UK high street.

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.

Rupert Hargreaves 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

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

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

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »