When looking for juicy dividends, there is life beyond the FTSE 100. Here are five FTSE 250 dividend shares I would consider buying for my portfolio. Dividends are never guaranteed, but all five companies pay out at the moment.
A couple of the shares, which I have already bought this year and would still consider purchasing, are in the financial services sector.
Insurer Direct Line raised its dividend modestly last year and now has a dividend yield of 9.1%. I think the company’s strong brand can help it attract and retain customers. That could help combat the risk of lower profit margins caused by customer switching in response to new rules on renewal pricing. Direct Line’s focus on areas like home and motor insurance also attracts me. I expect demand for such lines of business to be durable, even in a recession.
I would also consider fund manager Jupiter. Its shares are down 42% over the past year. As they keep falling, I am wondering if I am missing something. Net outflows of customer funds are a concern, as they could hurt revenues and profits. But I think Jupiter’s reputation and experience could help it stop such outflows. Meanwhile, the falling share price has pushed up the yield to a very attractive 11.0%.
FTSE 250 brick maker
A number of housebuilders are in the FTSE 250 index, but I would also consider building materials companies. For example, Ibstock yields 4.4%. The company is the country’s leading brick maker by volume and also makes concrete products. It has three dozen manufacturing sites and its own clay quarries. I think that gives it a strong competitive position.
Even if house building demand slows down due to economic pressures, bricks will remain in demand for renovation projects as well as new building works. From a long-term investing perspective, I think Ibstock’s strong position will allow it to benefit from the ongoing demand for new homes.
I would also consider buying a couple of FTSE 250 retailers for my portfolio.
The fantasy worlds specialist Games Workshop operates from its own network of shops, online, and as a wholesaler to other retailers. That wide reach allows it to build customer loyalty to some of its proprietary products, such as the Warhammer franchise. That gives it a competitive advantage I expect to endure for years.
One risk I see to the company is its concentrated manufacturing footprint. If for any reason a factory goes offline for a long time, that could hurt its revenues and profits. The shares yield 3.1%.
Another retailer I would buy for my portfolio at its current price is Dunelm. The shares have fallen 41% in the past year, pushing the dividend yield up to 4.4%. That share price fall reflects some of the risks investors see here. Consumers tightening their belts could lead to a fall in spending on homewares, meaning lower profits for Dunelm. But I think its strong balance sheet and proven retail expertise could help it continue to do well. Its shares look like a bargain to me and I have been buying them for my portfolio.
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Christopher Ruane owns shares in Direct Line, Dunelm and Jupiter Fund Management. The Motley Fool UK has recommended Games Workshop, Ibstock, and Jupiter Fund Management. 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.