It’s well-known that the UK stock market’s a treasure trove when it comes to passive income stocks. The FTSE 100’s littered with mega- cap, high-yielding dividend gems such as HSBC, Legal & General, Imperial Brands and BP.
But many investors overlook the smaller FTSE 250, believing the more-domestically-focused index to be less reliable.
While that assumption isn’t entirely inaccurate, it does mean many investors miss out on some of the best income opportunities.
Despite the slightly smaller valuations, I often find some of the best British income stocks on the mid-cap index.
Let’s have a look at one top-quality share I think deserves a place in the FTSE 100 — and might soon secure that accolade.
The next big name in energy?
Up-and-coming oil and gas company Ithaca Energy (LSE: ITH) only listed on the London Stock Exchange (LSE) a few years ago. Yet in that short space of time its market-cap’s grown to £3.52bn — larger than some FTSE 100 constituents.
That puts it in good stead to join the blue-chip index in the next reshuffle.
In 2025, the company paid out 30.23c per share, equating to a yield above 10%. Usually, that kind of inflated yield would set off alarm bells, but Ithaca might just have what it takes to honour that commitment.
Recent Q1 2026 earnings show strong performance, with net income rising to £50m, up from £26.3m the prior quarter. Free cash flow now sits around £500m, a notable increase from just £197.1m in Q1 2025.
Admittedly, it doesn’t have much of a proven history to back its dividend payouts. That’s often where newer income stocks lose favour to more established names.
Also, energy’s a volatile industry — if profits slip, the dividend will almost certainly be cut down.
But that doesn’t mean it isn’t worth a closer look — after all, cash flow covers dividends three times and debt’s almost half its equity. So I see no reason to fear a dividend cut any time soon.
So what kind of income could a stock like Ithaca deliver?
Crunching the numbers
Ithaca shares are currently selling for around 213p a piece, so 1,000 shares would cost £2,130. That’s not exactly spare change, but it could deliver a serious lump of passive income. If the 10% yield holds, it would pay out £213 after just one year.
Reinvest those dividends for seven years, and it could compound to £4,252, paying out £414 a year. Now, not only have you almost doubled your money, but you’re bringing in enough spare cash for a decent weekend away.
Of course, these are just projections and much can change in a few years. But unlike many mid-caps, Ithaca has a clear roadmap backed by a reliable management team and solid fundamentals.
The bottom line
When picking income stocks, it’s comforting to opt for the risk-free, stable compounders we all love. And there’s certainly a well-earned place for them in any portfolio.
But if you hope to boost your income above the FTSE 100 average, stocks like Ithaca Energy are worth a closer look.
Yes, they may be riskier, but a closer look at the finer details sometimes reveals a hidden gem. Is Ithaca one of them? I think it might be, which is why I’ve moved it higher up on my watchlist for this year.
Should you invest £5,000 in Ithaca Energy Plc 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 Ithaca Energy Plc made the list?
Mark Hartley owns shares in HSBC, Legal & General and BP.
