Again, there’s no guarantee any of the companies mentioned below will always be in a position to return cash to holders, hence the need to stay appropriately diversified.

Green dividends

Renewables Infrastructure Group (LSE: TRIG) is a highly attractive option for tackling rising prices, in my opinion. The £3bn-cap company is expected to return 6.85p per share to holders in the current year. That’s a yield of 5.1%. By comparison, the FTSE 250 index can only offer 2.1% in passive income at the moment.

Another reason this company stands out for me is that it’s not missed a chance to hike annual dividends since listing on the UK market. True, these increases have been small, but I’d take this over big hikes that then become unsustainable.

At just over 15 times earnings, TRIG shares aren’t cheap, relative to the industry in which the company operates. However, they still look reasonably priced compared to the market as a whole. And buying here will allow me to tap into the sustainable energy trend that is only likely to get more popular with investors in the future. 

As a source of stable income, TRIG definitely grabs my attention.

Down… but not out

I’ve been a stockholder in price comparison website Moneysupermarket.com (LSE: MONY) since last year. While I originally bought in for its recovery potential, the dividend stream is welcome in the interim as inflation ticks higher. The forecast yield for this year stands at a solid 6.7%. 

One thing worth highlighting with Moneysupermarket is that profits only just about cover the payout. This could mean the company is forced to reduce its cash returns if (and that’s a big if) trading doesn’t bounce back as expected in 2022. Personally, I’m of the opinion that it will, hence why I remain invested here. Of course, I could be utterly wrong, which is why I’m also continuing to spread my money into other parts of the market.

Based on a 31% jump in earnings per share in 2022, MONY stock changes hands for a P/E of just under 13. For such a quality stock, that still looks a steal to me! But then I would say that.

8.3% yield from this FTSE 250 stock

Jupiter Fund Management (LSE: JUP) is by far the largest dividend payer of the three discussed here. Analysts have it returning an inflation-beating 8.3% in 2022.  

Similar to other asset managers, Jupiter is unlikely to have benefited from the poor start to the year for markets. It will be interesting to see what CEO Andrew Formica has to say about the outlook later this month. Full-year numbers are revealed on 25 February.

I’m also conscious that the company is not exactly consistent when it comes to raising its cash returns to investors. This may continue in the future if Jupiter is forced to reduce its fees to compete with rivals. The huge popularity of passive funds is another headwind. 

However, it seems that quite a lot of negativity is already in the price. Down 21% in the last 12 months, Jupiter shares now trade on a little less than 10 times earnings. I’d buy.

The post 3 inflation-busting FTSE 250 dividend stocks to buy appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended Jupiter Fund Management and Moneysupermarket.com. 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.

Fortunately, I think this is easily beatable. In fact, I’ve found a couple of stocks that should generate a far higher amount of cash for me.

6% dividend yield

The first high-yielding dividend stock to discuss is fund manager Jupiter Asset Management (LSE: JUP). Right now, shares in JUP can be picked up for 9 times earnings. That looks a great deal to me.

While certainly not the highest in its industry, operating margins of 27% are far better than many FTSE 250 constituents achieve. Recent years aside (due to the pandemic), the company also generates strong returns on capital — just the sort of thing I look for when selecting stocks. 

But, of course, it’s the dividends we’re interested in here. On this measure, JUP knocks it out of the park. 

Analysts currently have Jupiter returning 17.1p per share for FY21. Using the current share price, this becomes a yield of 6.5%. For perspective, that’s over 10 times what I’d get from the best instant access Cash ISA. 

It gets better. Based on earnings estimates, this cash return should also be covered 1.7 times by profit. As such, I doubt a dividend cut is on the horizon anytime soon. 

Obviously, never say never. As last year showed, firms can be quick to amend their policies on distributions in the event of severe headwinds. Stocks in the financial sector that Jupiter belongs are particularly vulnerable in this regard.

Another big yielder from the FTSE 250

A second FTSE 250 stock offering what appears to be a very enticing income stream is insurer Direct Line (LSE: DLG). It’s down to yield 24.3p per share this year. Using the current share price (305p, as I type), that gives a stonking dividend yield of 8%! 

In addition to this super payout, the company trades on what looks to be a cheap valuation (12 times earnings). That seems a whole lot more palatable compared to some stocks.

However, there are also a few things I’d need to be aware of before pulling the trigger. Unlike Jupiter, returns on capital are very low. The share price performance certainly isn’t worth shouting about either.

DLG shares are actually down 17% since 2016. Contrast this with the FTSE 250’s 34% rise and it seems clear to me that, based purely on capital gains, this stock won’t make me rich anytime soon. On top of this, dividend cover looks stretched (one times profits). Hopefully, this will prove temporary. 

Still, I’d be happier to buy DLG shares over hoarding cash. Keeping some money on the sidelines for emergencies and in preparation for the next correction/crash is never a bad thing. However, having an abundance for too long would be a spectacularly bad financial decision on my part.

Equities, while certainly higher risk, are nearly always a better option if I can ride out the inevitable waves of volatility.

All things considered, I’d be more comfortable buying more JUP than DLG for my portfolio. Then again, an 8% yield isn’t to be sniffed at, so long as I also had exposure to other sectors. 

The post 2 FTSE 250 stocks with 6%+ dividend yields! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Jupiter Fund Management. 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 two stocks may have performed very differently, but I’m happy to avoid both at their current prices. Here’s why I think they lack investment appeal.

By Jupiter, I’m not buying Jupiter!

Jupiter’s impressive rise has come despite a fall of 8% from over 430p to around 400p last Tuesday. The reason for the drop was news that one of the company’s key managers, Alexander Darwall, is leaving to set up his own fund house.

This followed a previous announcement that Darwall was stepping down from managing the £5.5bn Jupiter European and £2.4bn Jupiter European Growth funds. He’s agreed not to compete with Jupiter’s open-end funds for a period of two years. However, he remains manager of the closed-end £1bn Jupiter European Opportunities investment trust, and it’s expected the trust’s independent board will transfer management to his new firm.

Jupiter’s culture — “portfolio managers are able to operate in a highly autonomous manner with minimal bureaucracy” — is changing, according to analysts at UBS, and this could lead to further departures. But, it’s more the valuation of the company than so-called key-man risk that puts me off the stock.

At the current share price of 400p, its forward price-to-earnings (P/E) ratio of 14.6 is not outrageously expensive, while its prospective dividend yield is actually pretty generous at 6%. However, my trusty valuation yardstick for fund managers is not to pay more than 3% of assets under management (AUM). Jupiter is currently valued at 4.15% of AUM (market cap of £1.83bn versus AUM of £44.06bn). The share price would need to fall below 300p to get me interested.

I’d be off my trolley to buy Sainsbury’s

Sainsbury’s shares rallied to over 340p last year after it announced it had agreed a merger with Asda, subject to approval by the Competition and Markets Authority (CMA). However, they soon turned south on increasing fears the CMA would kibosh the deal. The fears proved well-founded, with confirmation the merger had been blocked coming in April this year.

Annual results a few days later and a trading update last week have done little to revive market appetite for Sainsbury’s shares — currently 205p — although my colleague Karl Loomes reckons the price is now low enough to excite his interest. Personally, I see Sainsbury’s as a weak player in a tough market, and a company whose earnings outlook is deteriorating.

At the time of the results on 1 May, management made no comment on the then-consensus forecast of £652m pre-tax profit for the current year. But analysts at Barclays noted pointedly that management “is aware it would need to say something if this was plainly unachievable.”

Just two months on, and an updated (28 June) pre-tax-profit consensus forecast, published on Sainsbury’s corporate website, is £20m lower at £632m. Keep an eye on that analyst consensus page through the rest of the year. I suspect you may enjoy an object lesson in how struggling companies manage down ‘market expectations’. It could be a more profitable exercise than buying the shares at what I think is only a chimerical current P/E of 9.5 and dividend yield of 5.2%.

The post Here’s why the Sainsbury’s share price scares me, and why I’m steering clear 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 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.

Metro Bank

According to shorttracker.co.uk, challenger bank Metro Bank (LSE: MTRO) is currently the most shorted stock in the UK, with nearly 12% of its shares being shorted.

Now, Metro Bank shares have already had a shocking run over the last 12 months, losing over 85% of their value. They were down another 11% yesterday. Much of this has been related to the fact that the group has been trying to raise £350m to fill a hole in its balance sheet after an accounting error led to some loans being assessed in the wrong risk band. This capital raising will dilute existing investors’ holdings. The bank may also have to issue a significant amount of debt. Despite the significant share price fall, hedge funds clearly still think the stock will continue to decline and they’re loading up on short positions to profit from continued share price weakness.

As such, this is definitely a stock to avoid, in my view.

Arrow Global

The second most-shorted stock right now is Arrow Global (LSE: ARW). This is a credit management services provider engaged in the purchase, collection, and servicing of non-performing loans. Like Metro Bank, it has already experienced a substantial sell-off. Trading as high as 470p in mid-2017, the shares now change hands for around 190p.

Currently, around 11% of the shares in Arrow Global are being shorted, which is significant. It appears that hedge funds have concerns over the group’s transparency, balance sheet, and leverage ratio. Some funds have also argued that European debt collectors are overly optimistic about how much debt they will actually recover.

Despite the fact the shares are cheap, this is another stock to steer clear of, in my opinion.

Jupiter Fund Management

Finally, FTSE 250 fund management company Jupiter (LSE: JUP) comes in at number three on the list of most-shorted stocks. It currently has around 10% of its shares being shorted.

Jupiter seems to be a classic case of a company that is experiencing challenging conditions. With passive investing (ETFs) becoming more popular, many traditional active investment managers are struggling at the moment, and last year’s equity market sell-off has compounded problems. Just look at Jupiter’s FY2018 results – the company experienced £4.6bn of outflows for the year and profit before tax was down 7%. The dividend was also reduced by 13%.

Jupiter could turn things around at some point, and it’s worth noting that the new CEO has just bought a large parcel of shares. However, for now I’d avoid the stock. When a stock is being shorted heavily, often the best strategy is to give it a wide berth.

The post Warning: Metro Bank isn’t the only FTSE 250 stock that hedge funds expect to crash 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. 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.

Size matters

The legendary growth investor Jim Slater once said that elephants don’t gallop. He was making the point that it’s much easier for small companies to double in size than big companies.

History suggests Slater was right. Take a look at how the FTSE 250 index of mid-sized companies has performed against the FTSE 100 in recent years:

If you’d put £10,000 into a FTSE 250 tracker fund five years ago, you’d have about £18,700 today, plus dividends. If you’d played safe with a FTSE 100 fund, you’d only have about £10,800, plus dividends.

The extra profit enjoyed by FTSE 250 investors has been achieved without any extra effort or difficult stock picking.

Admittedly, the 4.4% dividend yield from the FTSE 100 is higher than the 3.2% annual payout from the FTSE 250. But this isn’t enough to make up for the smaller gains delivered by the big-cap index. The FTSE 250 has smashed the FTSE 100 over the last five years — and over much longer time frames.

Is this a sure thing?

I can’t guarantee that the FTSE 250 will continue to outperform the FTSE 100. Between about 1996 and 2002, the FTSE 250 failed to beat the big-cap index. This may happen again.

Despite this, I do believe by investing in the kind of successful mid-sized companies found in the FTSE 250, you can increase your chances of finding big winners. At the same time, you aren’t exposed to the kind of speculative, unproven businesses found at the bottom end of the market.

If you’ve left it late to start retirement saving, I think putting your cash into a FTSE 250 tracker fund could be the best investment you’ll find for a five-to-10 year timeframe. To avoid any future tax bills, I would invest inside a Stocks and Shares ISA, if possible.

Reliable top performers?

To finish off, I’ve selected three stocks from the FTSE 250 I’d be happy to buy and hold forever. All three are proven performers and, together, I think they should provide a good mix of income and growth.

Britvic: The soft drinks firm owns brands including J2O, Robinsons and Fruit Shoot. It’s a reliable performer that generates high returns and has increased its dividend payout from 10p to 28p per share since 2006.

Computacenter: This IT infrastructure firm builds data centres, networks and much more for its clients. It’s profited from the long-term growth trend in online services. The shares have gained 50% in two years and has a great track record of paying out surplus cash to shareholders.

Jupiter Fund Management: Active fund managers are out of fashion at the moment, but Jupiter has a good track record, in my view, and is very profitable. A forecast dividend yield of 6.4% for 2019 is double the FTSE 250 average. I think Jupiter could be a good choice for income seekers.

The post No retirement savings at 60? Here’s how the FTSE 250 could help 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.

Here, I’ll give my view on whether Standard Life could be a top Footsie bargain, and whether mid-cap Jupiter could also have investment appeal.

Valuation measures

Jupiter’s share price is little changed after its Q1 trading update. It said assets under management (AUM) increased £1.4bn to £44.1bn over the three months to 31 March. This was driven by positive market movements of £1.9bn, partly offset by a net £0.5bn of client withdrawals.

I mentioned reasonable earnings ratings and high yields, but I also find another measure of valuation useful for asset managers. This is market capitalisation as a percentage of AUM. I’ll come back to this after summarising some of the key earnings, dividend and AUM numbers in the table below.

* Based on consensus forecasts

As you can see, Standard Life is somewhat cheaper than Jupiter on P/E, as well as sporting a higher dividend yield. But what of market cap as a percentage of AUM?

My rule of thumb is that I won’t buy if it’s above 3%. This is a tip I picked up from, I think, Nick ‘Britain’s Warren Buffett’ Train. I’ve found it a decent yardstick for avoiding overpaying for an asset manager’s shares, and, conversely, for spotting a potentially undervalued stock.

Signs of overvaluation

While Jupiter’s P/E is not unreasonable and its high dividend yield is attractive, the pricing of 3.9% of AUM is a big red warning sign for me.

And the company also rings alarm bells on something else I use as a general barometer of overvaluation and danger. This is the level of ‘short’ interest in a stock — institutions (typically shrewd hedge funds) positioned to profit if a share price falls, and to lose money if it rises.

Jupiter wasn’t among the most heavily shorted stocks at the start of this year, but positions have increased so sharply that it’s become the fifth most bet-against stock on the London market. Personally, if owned Jupiter shares I’d be inclined to sell them and bank my profits.

Good risk/reward proposition

Standard Life looks an attractive investment on paper. The P/E of 14, dividend yield of 7.8% and pricing of 1.1% of AUM, suggest there could be good value here. There’s also very little short interest in the stock.

However, the company has struggled with fund outlows, and these would have been worse if Lloyds/Scottish Widows hadn’t been barred from withdrawing a £100bn mandate until the contract ends in 2022. Having said that, even if we were to knock the £100bn off Standard Life’s AUM, the stock would still look cheap at 1.4% of AUM.

Finally, the dividend may not be the safest. As things stand, though, the City consensus is for modest increases this year and next, as the company comes through a period of transition. On balance, I see a good risk/reward proposition, and rate the stock a ‘buy’.

The post Are the Standard Life share price and 7.8% yield a top FTSE 100 bargain? 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 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.

On the face of it, Schroders’ FTSE 250 peer Jupiter Fund Management (LSE: JUP) — whose share price is similarly depressed —  is arguably even better value, based on its comparative earnings multiple and dividend yield. However, another key valuation measure and a worrying development in recent months lead me to conclude that the mid-cap manager is best avoided.

Earnings and dividends

Founded in 1804, Schroders remains a family-controlled business. It has two share classes: voting (ticker SDR) and non-voting (ticker SDRC). The non-voting shares offer particularly good value, because they typically trade at a discount to the voting shares — currently 2,115p versus 2,714p.

City analysts are forecasting Schroders to post earnings per share (EPS) of 215p when it announces its 2018 results on 7 March. As such, buyers of the voting shares are paying 12.6 times forecast earnings, while buyers of the non-voting shares are paying just 9.8 times. Similarly, a forecast dividend of 113p, gives a prospective yield of 4.2% on the voting shares, but 5.3% on the non-voting shares.

Jupiter is a somewhat younger company, having been founded in 1985 and floated on the stock market in 2010. When it releases its annual results this Friday, City analysts will be looking for EPS of 31.4p and a dividend of 24.3p (consisting of a 15.7p ordinary dividend and an 8.6p special). A current share price of 328.7p represents 10.5 times the forecast earnings, while the prospective dividend yield is 7.4%, including the special.

Assets under management

While both stocks have attractive earnings multiples and dividend yields, I come now to that other valuation measure I mentioned earlier. I’d only consider buying a fund manager when its shares are valued at less than 3% of its assets under management (AUM). I consider this provides a reasonable margin of safety to mitigate falls in the value of assets and fund outflows in the event of a market downturn.

Schroders’ market capitalisation (combining both voting and non-voting shares) is £7.33bn, compared with its AUM of £439bn. As such, the stock is valued at an attractive 1.7% of AUM. By contrast, Jupiter — market cap of £1.47bn and AUM of £42.67bn — is valued at what I consider a pricey 3.4% of AUM.

Short straw

Writing about Jupiter last May, when the shares were trading at 450p, I expressed my concerns about the company’s reliance on its flagship Dynamic and Strategic bond funds (after a 30-year bull run in fixed income) and fund outflows. However, there’s been what I see as another worrying development in recent months.

Despite the fall in the company’s shares over the past year, shrewd hedge funds have lately ramped up their bets that the shares will fall further from here. When I was writing back in May, disclosable short positions in the stock totalled just 1.1%. This had risen to 2.5% by the end of the year, but has really been shooting up in 2019. Currently, 10 institutions hold disclosable short positions totalling 8.4%. The numbers for Schroders are 0% and 0%.

The post 1 FTSE 100 dividend stock I’d buy (and a FTSE 250 stock I’d avoid) appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Schroders (Non-Voting). 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.

Geared play

If you can hold your nerve, now’s the time to pick up your favourite stocks at discount prices. Asset management companies make a tempting target, because they rise faster when investors are bullish, and fall faster when they are bearish, as they’re doing today.

Fund managers Schroders (LSE: SDR) and River & Mercantile Group (LSE: RIV) are both down more than 3%, double the current 1.5% loss on the FTSE 100. Things look even worse at Jupiter Fund Management (LSE: JUP), down 5.99% after publishing its trading update for the three months to 30 September.

Falling star

Jupiter has been hit by net outflows totalling £800m during the quarter, offsetting positive performance of £300m, with European fixed income funds bearing the brunt of it. The group still has £47.7bn assets under management, but the news was enough to spook investors.

This puts the tin lid on a tricky 2018, with the group’s share price starting the year at 624p and now trading at 355p, a drop of almost 45%. High redemptions from its dynamic bond are hitting plans to expand its UK focus to become a broad-based European fund manager.

Dark star

Jupiter looks cheap, though, trading at 11.9 times earnings with a whopping forecast yield of 7.2%, although cover is thin at 1.2. However, City analysts are pencilling in a 4% drop in earnings per share (EPS) in 2018, and another 1% drop in 2019.

This looks like a tough year all round for fund managers, with Schroders and River & Mercantile both down around 17% year-to-date. Schroders was briefly lifted by weekend press reports that it’s in talks with Lloyds Bank to create a leading wealth management business, although the stock market sell-off has wiped out those gains. It’s also winning the race for the £109bn mandate from Lloyds to manage its Scottish Widows investment assets.

Young man River

Schroders’ most recent results showed six-monthly pre-tax profits rising 8% to £371.1m, with assets under management up £1.2bn to £449bn, helped by healthy net inflows. Trading at 13.3 times earnings, it looks tempting. You also get a forecast yield of 3.8% yield with cover of 2. EPS growth looks patchy, falling 2% this year, but rising 5% next. If markets keep falling, this could be a real bargain.

River & Mercantile may have slipped lately, but its share price has nonetheless risen 50% since floating in 2014. It also has attracted a loyal band of enthusiastic investors. This is another high yielder, with a forecast income of 5.8% and cover of 1.2. That’s a mighty dividend from a relative minnow. Again, its yours for a slight discount of 13.8 times earnings.

Swept away

River & Mercantile is building its business by investing in its operating platform, international capabilities, and new product launches and, as my Foolish colleague Ian Pierce has pointed out, it was recently posting strong inflows and profits before tax. However, EPS growth has been erratic with a 5% drop in the year to 30 June 2017, and City analysts anticipate a 17% drop this year. Of the three, Schroders would be my tip.

The post Are these 3 stocks all screaming buy as global markets plunge? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

harveyj has no position in any of the 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.

From its IPO to 2017, the insurance group had distributed more than 100% of its earned profits to investors, giving an average annual dividend of more than 7%.

Unfortunately, a series of devastating natural catastrophes last year hit the insurer’s bottom line and, as a result, for the first time since going public, Lancashire didn’t issue a full-year special payout.

Unique dividend model

Because of the nature of the insurance business, Lancashire has adopted a unique dividend model. The company distributes a small dividend once every quarter and once a year, and (towards the end of the year) it declares a large distribution paying out any excess profits.

Last year, the group skipped the payout as insurance losses wiped out profits for the whole year, leaving little for investors. This year, however, analysts expected the company to reinstate its special annual payout. Current projections estimate a total dividend of $0.44 for 2018, rising to $0.59 for 2019. Based on these numbers, the stock could yield 5.8% and 7.7% for 2018 and 2019, respectively.

I believe these figures might be a tad optimistic, especially for 2018, as today the company revealed that catastrophe losses in the third quarter will now wipe out all of the firm’s profit for the period. While management still expects a positive result for the full-year, a Q3 loss could mean a lower distribution than the City expects for 2018.

Still, despite the short-term drop in profitability, I’m positive on the long-term outlook for this business. I think now could be a great time to buy the stock.

Indeed, right now, shares in the Lloyd’s of London insurer are trading at a forward P/E of just 11. What’s more, insurers tend to overestimate losses when they are first announced, so I’m optimistic that Lancashire’s initial losses for the third quarter will not turn out to be as bad as expected. With this being the case, I’m looking to add to my position in the next few days.

Cash backup

If Lancashire is not your cup of tea, another income play that currently looks cheap to me is Jupiter Fund Management (LSE: JUP). 

There’s a lot to like about this City institution. For a start, the stock currently supports a dividend yield of 7.1%, and trades at a forward P/E of just 11.9. Earnings growth has allowed management to increase the firm’s payout at an average annual rate of 14.2% for the past six years.

And I’m struggling to see why the market has awarded the company such a low valuation. Earnings per share (EPS) are expected to contract by approximately 3.3% for 2018 to 32.7p, which is disappointing. But a recovery, albeit a small one, is scheduled for 2019 when EPS growth is projected to be in the region of 0.6%. Not much, but better than a decline.

The one red flag that I can see here is that Jupiter’s dividend is only covered 1.2 times by EPS, below what I’d usually consider comfortable for a dividend. Typically, I’d want to see a cover of 1.5 times, or more. However, I’m willing to overlook this weakness as Jupiter has £313m of cash on its balance sheet, enough to sustain the distribution for two years in the worst case scenario.

The post These two top FTSE 250 dividend stocks yielding 7%+ are on sale now appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Lancashire Holdings. 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.

So before you invest in the stock because of its high dividend yield, it’s crucial to examine whether the company is likely to sustain such high dividend payout levels.

Profit warning

Consumer electronics retailer Dixons Carphone (LSE: DC) may be one stock that has recently caught the attention of dividend investors, after shares in the company plunged sharply following a profit warning on Tuesday.

The shares have since recovered slightly, but they’re still trading at 17% below their value of just a week ago. As such, the dividend yield of its shares has risen sharply, and currently stands at 5.9%. Could this be an opportunity to buy the stock on the cheap, or should you steer clear?

Dividend unchanged

Reassuringly, the company said that it expects to pay an unchanged full-year dividend of 11.25p, despite warnings that pre-tax profits could fall by as much as 21% in the coming year. What’s more, its dividend policy is backed up by resilient free cash flow generation and a strong balance sheet. Net debt is expected to improve to around £250m by the end of the 2017/18 financial year, demonstrating the company’s improved cash conversion.

Certainly, the company faces tough retail headwinds, amid weak consumer confidence in the UK and a shift towards online shopping, but it’s not all doom and gloom. The company continues to see growth in revenue and profits in its international business, and has a plan to fix its problems in the UK.

Dixons has a new leadership team in place, has big plans to address its historic underinvestment in its stores and improve its cost efficiency in the mobile market. But despite the opportunity for a turnaround in its financial performance, valuations are undemanding. On top of an attractive dividend yield, shares in the retailer trade at a tempting forward price-to-earnings ratio of just 7.4.

Asset manager

Elsewhere, Jupiter Fund Management (LSE: JUP) is another stock that deserves a closer look from income investors.

Shares in the asset manager have come under heavy pressure after recent outflows from the company’s Dynamic Bond fund. What’s more, the recent weak performance at the fixed income fund has also raised concerns that the company has become over-reliant on a small number of funds.

Re-rating

Jupiter has, until recently, been one of the fastest-growing asset managers in terms of growth in assets under management, so a re-rating of its shares appears to have been well-deserved.

And despite the concerns, earnings for the firm are still expected to grow steadily over the next few years, as Jupiter seeks to diversify away from its popular funds and push ahead into international markets, particularly in Asia. With City analysts forecasting earnings per share growth of 2% in 2018 and 5% in the following year, I’m confident about the sustainability of its dividends and its outlook going forward.

Including special dividends, City analysts expect dividends per share of 33.2p in 2018, giving prospective investors a forward dividend yield of 7.3%.

The post Dividend stocks: Two 5%+ yielders that I’m considering right now appeared first on The Twelfth Magpie.

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Jack Tang has no position in any of the 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.