While investors continue to pile into mainstream dividend stocks like Lloyds, Aviva, and Legal & General, there are plenty of other income opportunities that could be worth considering. In the FTSE 250 index, for example, there are many shares offering both income and growth at attractive valuations.
Here, I’m going to highlight a cheap FTSE 250 dividend stock that I like the look of right now. It’s outperforming a ton of blue-chip names this year, so could it be worth a look?
A hidden gem in the FTSE 250
The stock in focus here is CMC Markets (LSE: CMCX). It’s a leading provider of investment and trading platforms.
Founded in 1989, it operates in 12 countries today. Globally, it has over 2m traders and investors on its platforms.
Now, I last covered this FTSE 250 company in March. At the time, I was quite bullish on it.
Since then, its share price has jumped about 12% to 372p. But I don’t think it’s too late to consider getting involved here as the fundamentals look very strong at the moment.
A great business model
The beauty of this company is that it can do well when markets are rising and when they’re falling. When they’re rising (as they are now), people want to trade in order to capitalise.
However, when they’re falling, people also want to trade. Some traders will look to close out positions to reduce risk while others will look to buy on the dip.
Another thing to like about it is that it’s doing white label deals with other financial services firms. For example, it recently signed a major deal with Australian bank Westpac (and as a result is now Australia’s second-largest stockbroker).
These kinds of deals offer a new source of growth. Note that late last year the company said that further partnerships were at an advanced stage (we might get more details on these when the company reports later this week).
Attractive financials
As for the financials, they look good. Revenue is rising – for the year ended 31 March analysts expect £392m versus £288m three years earlier.
Meanwhile, return on capital employed – a key measure of profitability – is very high. And the balance sheet is strong.
How’s the dividend yield?
As for dividends, they’re attractive. For the financial year recently ended, analysts expect a payout of 14.7p per share.
That translates to a yield of nearly 4%. Note that dividend coverage is expected to be high so there could be scope for decent increases in the years ahead.
The valuation
Zooming in on the valuation, it’s quite low. With analysts expecting earnings per share of 28.1p for the year recently ended, the price-to-earnings (P/E) ratio is only 13.3.
I see value on offer at that earnings multiple. In my view, the stock is a bargain today.
Worth a look?
Now, of course there are risks here. Probably the biggest one is competition from rivals.
This is a competitive industry. And new players like Robinhood (I own shares here) are aggressively trying to capture market share.
I like the risk/reward set-up, however. In my view, this dividend stock is worth a closer look.
But it’s not the only dividend payer that looks interesting to me right now…
Should you invest £5,000 in Cmc Markets Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Cmc Markets Plc made the list?
Edward Sheldon owns shares in Robinhood Markets
