Three stocks from the FTSE 250 I’d happily buy for a retirement portfolio are Primary Health Properties (LSE: PHP), Close Brothers (LSE: CBG) and NextEnergy Solar (LSE: NESF). Let me explain why I believe these stocks are highly attractive for income seekers.

Clean bill of health

Primary Health Properties (£1.5bn market cap) has increased its dividend each and every year for the last 22 years. This is a superb record, and actually puts many FTSE 100 companies to shame.

The group owns primary health facilities in the UK and Republic of Ireland. The majority are GP surgeries, with other properties let to NHS organisations, pharmacies and dentists. Long-term leases, most income backed by government, and high occupancy rates are features of the business. These features go a long way to explaining why PHP has been able to build such an impressive dividend record, and why it has every prospect of continuing to deliver a reliable rising income in the future.

The company pays dividends quarterly, in February, May, August and November. At a share price of 131p, with the next four payouts forecast to total 5.7p, the prospective first-year yield is 4.35%.

A bank to bank on

Close Brothers (£1.9bn market cap) is a leading UK merchant bank. It has built a well-deserved reputation as a prudently-managed business. Notably, it was able to maintain its dividend through the financial crisis when other banks were slashing or suspending their payouts.

The firm’s record makes it one of the few banks I’d be happy to buy and hold for income at any point in the economic cycle. Indeed, its dividend yield is particularly attractive at the present time, due to Brexit worry weakness in shares across the banking sector.

Close Brothers pays an interim dividend in April and a final dividend in November, the final one generally being around double the interim. I’ve cautiously pencilled in 43p for the next final and 22p for the following interim. At a share price of 1,257p, the 65p total gives investors a prospective first-year yield of 5.17%.

Sunny money

Investing in renewable energy infrastructure has moved into the mainstream in recent years. Widespread public and political support for a cleaner future, and technological advances, have made this an attractive area to invest in. NextEnergy Solar (£700m market cap) is an investment company that meets this demand.

It joined the stock market in 2014, and has built up a portfolio of 87 solar power plants on agricultural, industrial and commercial sites. The majority are in the UK, but it’s also acquired eight in Italy. Its aim is to increase its annual dividend by UK RPI inflation, and it’s done this each year since its flotation.

Dividends are paid quarterly in September, December, March and June. The board is targeting a payout of 6.87p for the upcoming four quarters, giving investors today, at a share price of 120.5p, a prospective first-year yield of 5.7%.

In my opinion, Primary Health, Close and NextEnergy are worthy candidates for inclusion in a diverse portfolio of income stocks. The average yield of the three is just over 5%.

The post 3 FTSE 250 dividend stocks I think are ideal for retirees appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties. 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.

If you want to invest your spare cash to become a millionaire, I believe the low-cost, tax-free shelter provided by a Stocks and Shares ISA is a better way to achieve this goal. Today, I want to look at two stocks I’d choose for investors wanting a hassle-free way to build wealth.

A 141-year heritage

FTSE 250 merchant bank Close Brothers (LSE: CBG) can trace its history back to 1878. Today, it’s a modern organisation with specialist expertise in lending, wealth management, and stock broking.

The bank said on Friday its performance has remained stable over the last 12 months, despite “mixed trading conditions.” Total lending has risen by 5.1% to £7.6bn, while bad debts are said to remain low. However, lower fee levels and higher funding costs mean that Close’s net interest margin, a measure of profitability, has fallen from 8% to 7.8%.

The shares have dipped slightly today, and I guess this is a slight disappointment. But it’s worth remembering the big high street banks all have net interest margins of less than 3%. By comparison, Close Brothers remains highly profitable.

Why I’d buy

The companys’ stock has comfortably outperformed the big high street banks in recent years. Dividends have been generous too. Over the last 20 years, the payout has risen fourfold, from 14.4p to 63p. Unlike many financial firms, the dividend wasn’t cut during the financial crisis.

My sums show shareholders have enjoyed a 22% return from dividends over the last five years. Share price gains lift the total return to about 30%. With the stock trading on 10 times forecast earnings and offering a 4.5% dividend yield, I think Close Brothers remains a good buy-and-hold stock.

Simple pleasures

Most of the children I know drank Fruit Shoots when they were younger. Some have since progressed onto drinks such as J2O, Robinsons squash, R Whites and Tango. Many also like Pepsi and 7UP. What all of these brands have in common is that they’re either owned or produced under exclusive licences in the UK by Britvic (LSE: BVIC).

Soft drinks have been popular in the UK since Victorian times, and I don’t see that changing in my lifetime. Britvic’s large product range, track record of growth, and cautious international expansion, suggests to me it’s likely to be a rewarding long-term investment.

The right time to buy?

The group’s financial performance certainly seems to suggest these drinks could be good for shareholders. Its operating margin has been stable at about 11% (or more) since 2014. Return on capital employed, which compares operating profit to the capital invested in the business, has averaged an impressive 18% over the same period.

After a period of heavy investment, Britvic’s net debt looks a little high to me at the moment. But borrowings are expected to fall as cash generation improves. I don’t think shareholders need to be concerned. BVIC stock currently trades on 15 times forecast earnings, with a 3.3% dividend yield. That seems a fair price to me. I’d be happy to add the shares to a long-term portfolio.

The post Forget buy-to-let: I think these FTSE 250 dividend stocks can help you become an ISA millionaire appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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.

Meanwhile, their FTSE 100 peer Barclays (LSE: BARC), and mid-cap merchant bank Close Brothers (LSE: CBG), which released its half-year results today, have fared less well. The former is up 9% and the latter just 3%.

Could the two laggards be primed for a comeback, and market-smashing returns?

Prudent positioning

Close is an admirable bank with a service-led business model, disciplined approach, and commitment to investing through the cycle. Its philosophy saw it perform resiliently through the Great Financial Crisis, even maintaining its dividend amid the devastation all around it.

Today’s report for the six months ended 31 January was peppered with words such as ‘prudent’ and ‘conservative’. Management isn’t chasing growth in competitive areas of the market, but is focused on maintaining pricing discipline and prioritising credit quality. If history is any guide, you won’t find Close has been swimming naked when the economic tide goes out.

Rich rating

The Banking division delivered a modest 1% increase in adjusted operating profit in the latest period. Meanwhile, its smaller Asset Management and market-making (Winterflood) businesses remained profitable, but saw profits decline year on year. Net inflows in Asset Management were more than offset by negative market movements, while Winterflood was impacted by lower trading volumes. As a result, group adjusted operating profit was down 4%.

I’m expecting a similar outturn for the full year, and conservatively estimate EPS in the region of 136p and a dividend of 65p. At a share price of 1,480p, this gives a price-to-earnings (P/E) ratio of 10.9 and a dividend yield of 4.4%. Along with a price-to-tangible net asset value (P/TNAV) of 1.98, this is a rich rating relative to Footsie peers.

I don’t think now is the ideal time to buy the stock, but it’s a bank I’d be happy to hold through the economic cycle. I rate it a ‘hold’ at this stage.

Classic value opportunity

Barclays is dirt cheap compared to Close. At a share price of 163p, it has a P/TNAV of 0.62 and trades on a forward P/E of 7.4, with a prospective dividend yield of 4.6%. Of course, while Close has built an excellent reputation for trust among its customers and shareholders, Barclays has been a scandal-ridden business for years. It’s paid a heavy price for past misdeeds, both in financial terms and investor trust.

Given that the current management team is untainted by the past, and increased regulatory scrutiny since the financial crisis, it’s hard to believe Barclays will be quite as ‘accident-prone’ in the future. And with its latest results showing an improving financial performance, I can certainly see there’s a case, as my Foolish colleague Roland Head has argued, that Barclays represents a classic value investing opportunity.

More cautious view

On the other hand, I’m concerned about where we are in the economic cycle. And also about the fallout of a possible no-deal Brexit, which has another of my Foolish colleagues, Alan Oscroft, holding back some cash for potential post-Brexit banking bargains.

If Roland’s right, Barclays could smash the FTSE 100. However, I think this is one that really could go either way. On balance, I lean towards the more cautious position of avoiding the stock for the time being.

The post Is the Barclays share price primed to smash the FTSE 100? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.

Today, I want to profile two under-the-radar banking stocks that both pay shareholders dividends as well. Could these boost your personal balance sheet?

Close Brothers

Reporting full-year results today is Close Brothers Group (LSE: CBG), a FTSE 250 bank I have long been bullish on. What appeals to me most is its dividend growth track record. Whereas banks such as Lloyds and Barclays slashed their dividends during the global financial crisis, CBG maintained its payout. And since then, it has recorded eight consecutive dividend increases, which is an excellent achievement.

FY2018 results today look solid. For the year ended 31 July, adjusted operating profit rose 4% to £278.6m, and adjusted basic earnings per share increased 5% to 140.2p. The loan book grew 6.6% on an underlying basis to £7.3bn, and the bank generated a return on equity of 17%. Once again, it hiked its dividend by an inflation-beating 5%, taking the total payout per share to 63p (a yield of 3.8%). CEO Preben Prebensen commented: “All of our businesses have continued to successfully navigate and make the most of current trading conditions, while continuing to focus on maximising opportunities in future years.”

So, it appears that the business has momentum at present. But are the shares a ‘buy’ right now?

They don’t look expensive at present, trading on a P/E ratio of 11.8, although that’s a higher valuation than Lloyds (forward P/E 8.0) and Barclays (forward P/E 8.3). Knowing that the stock does tend to move up and down a fair bit, it could be worth waiting for a more attractive entry point, I think. With a bit of patience, it’s probably possible to pick up CBG at a slightly lower price with a yield above 4%. For now, I’m keeping the bank on my watchlist.

Another dividend-paying bank

Another FTSE 250 bank that looks really interesting from a dividend-investing perspective is challenger bank OneSavings Bank (LSE: OSB). Since paying a maiden dividend of 3.9p in 2014, it has increased its payout by 230% and is forecast to reward shareholders with a dividend of 14p per share this year. That equates to a healthy yield of 3.4%, with projected dividend cover of almost four times.

Like Close Brothers, it has a fair bit of momentum at present. In August, the group posted a 17% rise in profit before tax and lifted its interim dividend by a huge 23%.

As a buy-to-let specialist, there are risks to the investment case here in the form of regulatory meddling and property market weakness. Yet, in my view, these risks are already incorporated in the stock’s valuation, as its forward P/E ratio is a low 7.8. When you consider that other challenger banks, such as Shawbrook, Aldermore and Virgin Money, have all been targeted for takeovers recently, that valuation looks worth the risk.

The post Are these banks better buys than their FTSE 100 peers? appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.

“The profitability of banking is a function of two items. Return on assets [ROA] and assets to equity [financial leverage],” he said. “If you have 20 times leverage and you’re getting 1.5% on assets, you’re making 30% on equity [ROE] … Banks were earning 25% on tangible equity not so many years ago. And really, that’s kind of a crazy number. You know, for a basic semi-commodity business.”

The reason it’s a crazy number? As Buffett said, prophetically, in 1990: “When assets are 20 times equity — a common ratio in this industry — mistakes that involve only a small portion of assets can destroy a major portion of equity.”

A tale of two banks

The tables below show ROA, financial leverage and ROE in 2007 (ahead of the financial crisis) and recent years for Lloyds (LSE: LLOY) and what I’ll call for the moment ‘Mystery Bank’.

Source: Morningstar

As you can see, in 2007 Lloyds flaunted the kind of ‘crazy’ ROE referred to by Buffett. This was created from a pedestrian ROA and a crazy level of financial leverage.

Meanwhile, Mystery Bank had a much superior ROA, far more conservative leverage and a lower ROE. While the financial crisis virtually wiped out Lloyds’ shareholders, Mystery Bank’s shareholders fared infinitely better — even continuing to enjoy dividends. It’s the very model of a bank that can deliver value for its shareholders through the economic cycle.

Mystery Bank revealed

Lloyds will be a safer bank going forward but with stricter capital surplus requirements and mainstream banking more competitive than ever (challenger banks, online-only etc), achieving even its pre-crisis ROA of 0.94% will be difficult. This means it will always have to use higher leverage to achieve the same ROE as a bank with an ROA of 2%, or use the same leverage and deliver a lower ROE. Either way, in this respect, Mystery Bank is a fundamentally superior investment proposition. And for this reason, I’d always prefer to buy a slice of this business than of Lloyds.

Mystery Bank is FTSE 250-listed Close Brothers (LSE: CBG) — a long-established and leading UK merchant banking group providing lending, deposit-taking, wealth management services and securities trading. It’s trading on 12 times earnings, with a prospective dividend yield of 4%.

It’s been taking a cautious line in some areas of its business lately — notably motor finance where Lloyds is continuing to expand — so I do have concerns we may be entering a less profitable period for banks in the economic cycle. As such, I’m inclined to rate Close as a ‘hold’ at this time, while I see Lloyds as a stock to avoid.

The post The one UK bank I’d always buy before Lloyds Banking Group plc appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Of course, it’s not the only cheap stock at the present time. Reporting on Thursday was another company which could also offer a wide margin of safety.

Encouraging performance

The company in question is UK merchant banking group Close Brothers (LSE: CBG). It has made an encouraging start to its financial year, with all three of its divisions showing strong profitability. For example in its Banking division, loan book growth was 1.4%, driven by Property and Premium Finance. Meanwhile, there has been no major change in credit performance or trading conditions.

The company’s Winterflood division has benefitted from continued retail investor trading activity. The Asset Management division was boosted by further strong net inflows as well as positive market movements. Managed assets increased by 6.5%, with total client assets rising by 4.5% versus the end of the 2017 financial year.

With Close Brothers trading on a price-to-earnings (P/E) ratio of just 10.3, it seems to offer a wide margin of safety at the present time. This suggests that while earnings growth may be somewhat lacking in the near term, it could be subject to an upward re-rating over the long run. As such, now could be the perfect time to buy it.

Diverse appeal

Similarly, IWG also appears to have a discount valuation compared to many mid- and large-cap shares. It is forecast to record a rise in its bottom line of 23% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 0.5, which indicates that its shares could move higher after their 20% fall since the start of the year.

The company’s strong profit growth may also provide it with scope to raise dividends at a rapid rate. For example, it may only have a current dividend yield of 2.8%, but shareholder payouts are expected to be covered 2.4 times by profit this year. This should provide the company with scope to raise them over the medium term without jeopardising the financial health of the business. This mix of capital growth and dividend appeal means that the company could be of interest to a wide range of investors.

Therefore, while many shares may seem overvalued at the present time, IWG and Close Brothers appear to have considerable investment potential. Both stocks are cheap and this could enable them to offer index-beating returns over the long run.

The post Why IWG plc is set to be a millionaire-maker stock appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With hindsight, it was perhaps too much to expect its shares to embark on a resolute upward trajectory as early as five years after the financial crisis. That’s even though this was a bank that had avoided the ignominy of a government bailout, albeit through some wheeling and dealing that has ultimately led to charges by the Serious Fraud Office. Indeed, Barclays still has more than its share of legacy misconduct issues to resolve.

Nevertheless, the way I see it, the group continues to possess valuable franchises, the underlying businesses aren’t performing badly at all and above all else the stock simply looks too cheap to ignore.

Bargain basement valuation

Currently trading at 189p, Barclays shares are almost 20% below the 233p paid by Jes Staley when he bought £6.5m worth almost two years ago as the incoming chief executive. More fundamentally, they’re 33% below the bank’s last reported tangible net asset value of 284p.

City consensus underlying earnings forecasts are 17.5p a share this year, followed by 22.2p next year, representing earnings growth of 37% and 27%. These give a price-to-earnings (P/E) ratio of 10.8, falling to a complete bargain basement 8.5, and a price-to-earnings growth (PEG) ratio of 0.3 for both years, which is deeply on the value side of the PEG fair-value marker of one. It’s just too cheap to ignore, I tell you!

Good for customers and shareholders

While many investors are focused on either the recovery potential of the FTSE 100 banking giants or the exciting growth prospects of new challenger banks like Aldermore and Metro, a FTSE 250 bank that has been quietly going about its business since 1878 is often overlooked.

Close Brothers (LSE: CBG), which released its annual results today, is a leading UK merchant banking group providing lending, deposit-taking, wealth management services and securities trading. Built on those rather old-fashioned concepts of integrity, client relationships and prudent financial management, Close Brothers’ long-established business model has been good for customers and, as a result, for shareholders.

Attractive opportunity

In today’s results, the board lifted the 2017 dividend by 5% to 60p. The payout was 12p back in 1997 and in the 20 years since — which of course includes the 2008/9 financial crisis — the dividend has never been cut. The latest uplift came on the back of increased profits across all its divisions. Group operating profit increased 13% but net profit and earnings per share (131.7p) rose a more modest 3%, due to the government’s new banking surcharge which effectively adds 8% to the corporation tax bill of banks.

However, a 6% drop in the shares to 1,430p has more to do with the company saying that competition in some areas, such as motor and asset finance, is leading it at this stage of the cycle to focus on underwriting discipline rather than growth. This is eminently prudent in my view and I see the fall in the share price, which puts the bank on a trailing P/E of 10.9 and dividend yield of 4.2%, as an attractive opportunity to buy a slice of this distinguished business for the long term.

The post Barclays plc isn’t the only bargain bank stock I’d buy today appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.

Improving performance

Reporting on Wednesday was banking group BGEO (LSE: BGEO). The Georgia-focused company reported impressive results for the first quarter of the year that showed its current strategy is working well. For example, profit increased by 24.3% year-on-year, while book value per share was up 15.5% versus the same quarter of the prior year.

Furthermore, its cost-to-income ratio was 36.1% against 37.5% in the final quarter of the previous year, which indicates that it is becoming increasingly efficient. Return on equity moved higher by 3.4 percentage points to 23.5%, while a solid capital and liquidity position helped to strengthen BGEO’s balance sheet. Given the risks faced by the global economy, this could help to improve investor sentiment.

Looking ahead, BGEO is forecast to record a rise in earnings of 27% in the current year, followed by further growth of 15% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of only 0.5, which suggests their upside potential may be high. Certainly, the bank lacks the international diversity of many of its UK-listed peers. But with a low valuation and strong growth prospects, it could perform relatively well in the long run.

Dividend potential

With inflation moving higher, stocks which can grow dividends at a fast pace may become increasingly popular over the medium term. As such, growth investors may be concerned with dividend growth, as well as earnings growth, in future years. One company which appears to offer scope for the latter in particular is banking specialist Close Brothers (LSE: CBG).

The company has increased dividends per share by 7.5% per annum during the last five years and yet its shareholder payouts are covered 2.1 times by profit. This suggests that further inflation-beating growth lies ahead. Even if dividends were to rise at a similar pace in the long run as they have in the recent past, it is unlikely to hurt the financial strength of the business. Its bottom line has risen at an average growth rate of 15% per annum during the same period. As such, its current rate of dividend growth seems to be highly sustainable.

With Close Brothers trading on a price-to-earnings (P/E) ratio of 13, it seems to offer excellent value for money. Therefore, while other stocks may be cheaper right now, it could prove to be a sound investment option based on its risk/reward ratio.

The post Two top growth stocks trading at bargain valuations appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The merchant banker announced that its loan book had grown 2.3% between July and December, to £6.6bn, and on a year-on-year basis this was up 9.3%. This performance was “driven by good growth particularly in the premium finance and property businesses,” Close Brothers noted.

The disposal of its OLIM Investment Managers unit forced assets under management down to £7.8bn from £8bn a year earlier, it advised. But the business noted “improved market conditions” at its asset management arm, and that “both market movements and net inflows were positive.”

The bubbly results prompted the financial giant to comment that “we are confident in delivering a strong result for the first half as well as a good outcome for the full 2017 financial year.”

The City expects Close Brothers to experience a little earnings trouble in the immediate term, however, and has chalked-in a 4% bottom-line dip for the period to July 2017. But this is expected to be a temporary blip in the company’s long-running growth story and a 4% recovery in fiscal 2018 currently expected.

And Close Brothers’ still-robust earnings picture is expected to underpin further dividend growth. Last year’s 57p per share reward is anticipated to rise to 58.5p in the current period, and to 61.9p in 2018.

Not only do these figures yield a chunky 4% and 4.3% respectively, but dividend coverage rings in at 2.1 times through to the close of next year, nudging above the widely-regarded security watermark of two times.

Given the solid momentum across Close Brothers’ businesses, I reckon the stock could prove a shrewd income investment for the years to come.

Pulling back

The market has reacted less enthusiastically to Record Group’s (LSE: REC) latest trading statement, the stock last 5% lower from Thursday’s close and pulling away from three-year tops struck earlier this week.

The currency manager advised that assets under management equivalents rose to $56.6bn as of the end of December, up from $55bn at the end of September. But in sterling terms these dropped to £45.8bn from £42.4bn previously.

Record chief executive James Wood-Collins said: “US dollar strength dominated the second half of the quarter following the seemingly-unexpected result of the US presidential election in early November, with President-elect Trump’s economic ambitions being seen as supportive of the dollar.”

City brokers expect Record, supported by an expected 1% earnings rise, to lift the dividend fractionally in 2017, from 1.65p last year to 1.7p. Although the bottom line is predicted to swell an extra 8% in 2018, the firm is expected to keep rewards locked around this year’s levels.

These projections still yield a meaty 4.5%, taking apart the London big-cap average of 3.5% by some distance.

But dividend chasers must bear in mind that the projected payments for Record during this year and next are also covered 1.5 times and 1.6 times respectively by earnings, falling short of the aforementioned safety benchmark.

With geopolitical and macroeconomic turbulence set to persist in 2017 and probably beyond, I believe predictions of a dividend lift at Record could be considered a little less robust.

The post Should you buy these 4%+ yielders following today’s results? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But dig through the rubble and it’s possible to find FTSE 250 stocks that appear to have excellent dividend prospects. Here are two companies that I believe are high quality dividend stocks.

Greene King

Greene King (LSE: GNK) needs no introduction, being the UK’s leading pub retailer and brewer with over 3,000 pubs, restaurants and hotels across the country. With increased inbound tourism to the UK and recent retail figures showing consumers switching retail spend from products to experiences such as eating/drinking out, Greene King could be a major beneficiary of the trend.

From a dividend perspective, the company certainly has appeal. Greene King has grown its dividend by a compound annual growth rate (CAGR) of 10% since 1980, and in the last five years the dividend has been increased from 23p to 32p per share. That gives a yield of a solid 4.3% at the current share price and with analysts pencilling-in dividends of 34p and 35p for the next two years, dividend growth looks to be on the cards. Furthermore, Greene King’s dividend coverage ratio stands at a healthy level of 2.2, which is higher than many other UK companies with similar yields.  

Obviously, it’s possible that Brexit could negatively affect profitability at Greene King. And it must be noted that the company did cut its dividend marginally in 2009 during the height of the Global Financial Crisis, when consumer confidence declined significantly. The company has said that it’s “alert to a potentially tougher trading environment ahead.”

However, after a 20% fall in the share price this year, I do think the stock is starting to look tempting. Greene King currently trades on a P/E ratio of just 10.3 times next year’s earnings, which given the strong track record of the company, seems very reasonable to me.

If you’re looking for a stock that’s easy to understand, has long-term appeal, and a formidable track record of earnings and dividend growth, Greene King could definitely be worth a look in my opinion.   

Close Brothers Group

Another FTSE 250 company that has an excellent record as a dividend growth stock is Close Brothers Group (LSE: CBG).

Close Brothers provides lending, deposit taking, securities trading and wealth management services to its clients and the consistency of the bank’s profits over the last few years has been impressive.

Revenue and earnings have risen each year since 2011 and shareholders have been rewarded with a healthy dividend that has increased from 40p per share in FY2011 to 57p per share in FY2016. The bank currently yields 4.2% and also enjoys a healthy dividend coverage ratio of 2.3.

Close Brothers recently acknowledged that while Brexit is likely to result in economic uncertainty, the company’s strong balance sheet and established business model would enable it to continue to support its clients, invest in the business and generate returns for shareholders.

Trading on an undemanding P/E ratio of 11.3 next year’s earnings, Close Brothers doesn’t look expensive, and in my mind the stock has strong potential as a high quality dividend stock.

The post Are these the highest quality dividend stocks outside the FTSE 100? appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.