I’ve traditionally focused on the FTSE 100 to find candidates for my Stocks and Shares ISA. And I generally go for picks with strong long-term dividend prospects — then I reinvest my dividends every year.
But the top UK index now averages only 3% in dividend yields. And I see what I think could be some cracking long-term ISA stocks in the FTSE 250. I’m going to highlight two of them today.
Photos and Laundry
ME Group International (LSE: MEGP) is in the business of photo booths, laundry machines, vending machines, and other automated selling equipment. Investors have been offloading the shares, pushing the price down. And the big question for me is — what caused its 27% drop on 1 June.
An obvious answer is that there was a profit warning that day due to weakening revenue, “particularly in the French photobooth and laundry businesses.” Management blamed it on “a shift in consumer spending patterns driven by lower consumer confidence due to the ongoing conflict in the Middle East.“
The board also downgraded its full-year profit before tax guidance to between £69m and £74m.
This disappointment comes on the back of problems with regulatory changes in Germany, meaning its photo booths aren’t suitable for passport photos — a problem that new machines will hopefully solve.
So what do I think? I feel bearish investors have overreacted. The current dangers are clear. But a forecast dividend yield of 8.4% and price-to-earnings (P/E) ratio under eight makes me believe there’s a fair bit of safety in today’s valuation.
Property casualty
Primary Health Properties (LSE: PHP) has been recovering some of its five-year share price slide in the past couple of years. But we’re still looking at a robust 7.9% forecast dividend yield.
It owns and operates medical facilities, including medical centres and GP clinics. And it counts the NHS as a major long-term client. I’d say that brings benefits and risk. It does mean dependable long-term clients. But a company like this is also at the mercy of NHS spending on privately-owned facilities.
I reckon that’s probably the reason for the modest investor interest. At the current price, the shares trade on a discount to net asset value close to 20%.
Primary Health is structured as real estate investment trust (REIT), which offers tax concessions on qualifying rental income. The other side of this is that a trust must distribute at least 90% of that income to shareholders. Partly as a result, 2026 is expected to bring the 30th consecutive annual dividend rise.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Time to buy?
These both carry their own risks. But the risks are very different. And the two companies are in very different sectors. Together, that leads me to see them as strong possibilities to consider for a diversified Stocks and Shares ISA.
Primary Health Properties in particular has long been on my list of potentially perfect candidates. It just hasn’t quite made it to the top.
Should you invest £5,000 in ME Group International right now?
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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?
Alan Oscroft does not hold any positions in the companies mentioned.
