Some of the best income stocks are often those hiding in plain sight. And right now, tucked away in the FTSE 250, ME Group International (LSE:MEGP) is quietly offering a 7.9% dividend yield at a share price of around 109p.
For just £250, an investor can snap up 229 shares and unlock £19.79 of annual passive income immediately. That’s not a life-changing sum, but as a starting point for a dividend-focused portfolio it’s a genuinely compelling one.
So should I be rushing to buy?
What does ME Group actually do?
As a quick introduction, ME Group’s an international operator of over 49,000 automated self-service vending machines across 16 countries. Think photobooths in supermarkets, unattended launderettes in high-footfall locations, and digital printing kiosks.
Is it a fancy business? No. But it’s nonetheless a highly cash-generative one, enjoying steady, recurring cash flows from machines that require minimal maintenance and near-zero ongoing operational costs.
Is the yield safe?
Despite the cash-generative nature of this business, investors have seemingly been reluctant to load up on shares, resulting in the high yield we see today. And to be fair, there’s some cause for caution.
Photobooth revenue fell 4% last year, hit by a regulatory change in Germany requiring passport photos to be taken in citizens’ offices rather than booths. This impact was only compounded by a one-off printer supplier issue. And together, these knocked £3m off revenue and crimped Photo.ME EBITDA by 3.7%.
But that’s only half the story. The Laundry arm delivered a far more impressive performance. Here, segmental revenues surged 17.3% to £112.4m, EBITDA climbed 18.1% to £55.5m, and the company installed a record 1,145 net machines in the year, bringing the total laundry estate to 7,607 units.
In fact, the division now accounts for 46.1% of total group EBITDA, up from 41.1% in 2024, and this shift is still accelerating.
The result is that, even with regulatory hurdles in Germany, the group nonetheless posted a record pre-tax profit of £78.2m, paving the way for a 9.5% dividend hike to 8.64p per share. And with earnings covering this payout by 1.7 times, this seems like a no-brainer income stock to buy. So what’s the catch?
Where’s the risk?
The German photobooth headwind isn’t going away quickly. Management expects the drag to continue through the current financial year before a new generation of compliant booths, integrating biometric and AI capabilities, begins rolling out in the second half of 2026.
Until that rollout proves successful at scale, photobooth revenue will remain a source of ongoing uncertainty.
As for the Laundry segment, that too has its weak spots. Installing the machines comes at significant upfront capital costs. And the business remains on the hook for the electricity and water needed for the machines to operate, which can directly impact profit margins.
Put simply, if the utility costs of running its machines suddenly spike, earnings could struggle to keep up with their current pace.
So what should investors make of all this? Personally, I think too many investors are focused on the regulatory challenges surrounding this business. While this is a real headwind, it’s ultimately a short-term one.
As such, I think this income stock could be worth a closer look for long-term investors.
Should you invest £5,000 in ME Group International 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 ME Group International made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
