Today I’m going to highlight three of these opportunities, which all support dividend yields of 5% or more.

Booming market

My first pick is brick producer Ibstock (LSE: IBST). The design, manufacture and sale of bricks might not seem like a tremendously exciting business, but it is an essential one.

Ibstock manufactures bricks both here in the UK and in the US. It has been using its size and experience to grab market share and boost earnings over the past five years.

Since 2013, net profit has soared from £9.8m to £76m. In 2015 when the company went public, management started the dividend at 4.4p per share, and it has since risen to 16p. Based on current City projections, the stock offers a forward dividend yield of 5.7% and the distribution to investors will be covered 1.3 times earnings per share.

As long as the world’s population continues to expand, and the demand for housing grows with it, the need for bricks will only grow as well. That’s why I reckon Ibstock will remain a great income stock to buy and hold for the next decade.

Trusted lender

The second buy-and-forget stock that’s on my radar is Close Brothers Group (LSE: CBG).

Close Brothers is a banking and wealth management specialist. Over the past six years, earnings per share have grown at a compound annual rate of 7% as it has carefully invested profits back into its operations to expand in the markets it knows best. This careful expansion is one of the reasons why the financial services group’s return on equity has averaged 16.6% for the past five years (compared to the industry average of 10%).

If management continues on this course of careful, calculated, growth in the firm’s core markets, I reckon the business will continue to grow for many years to come.

These calculated expansion efforts have also allowed the company to up its dividend steadily. Close Brothers’ dividend per share has increased at an average of 6.1% per year since 2014, and the stock currently supports a dividend yield of 5.1%. The payout is covered twice by earnings per share.

Financial champion

My last pick is the hedge fund group Man (LSE: EMG). It is often said hedge fund owners make more money for themselves than for the investors who entrust them with the management of their money, so if you want to make money, one of the best strategies, in my opinion, is to own a hedge fund. You can do just that with Man.

Man earns money from clients with both regular management fees and performance fees, which can be lumpy. Still, despite this fact, net profit has surged from $72m in 2013 to $273m for 2018. City analysts are expecting further growth to $284m by 2019.

As earnings have surged, management has increased cash returns to shareholders, who are the ultimate owners of the business. This year the City believes the firm will pay out a total of $0.09 per share, giving a dividend yield of 4.7% on the current share price. Further growth is projected for 2020. The yield could hit 5.4% next year based on these current projections.

Right now shares in Man are trading at a forward P/E of 11.1.

The post £5k to spend? 3 FTSE 250 dividend stocks yielding 5% I’d buy for my ISA and hold for a decade appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Ibstock. 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.

Hedge your bets

Man (LSE: EMG) is one of the world’s largest listed hedge funds and, as well as producing attractive returns for its clients, it also looks after its shareholders. At the time of writing, the stock supports a dividend yield of 5.5% and the payout is covered 1.6 times by earnings per share.

City analysts are expecting the company to report a big jump in earnings per share this year and, according to a trading update for the first quarter of 2019 published by the company today, it looks as if the group is on track to meet this projection. During the first three months of the year, Man attracted an additional $3.8bn in funds, taking the total value of funds under management to $112.3bn at the end of the opening quarter.

As Man charges clients based on the value of assets invested with the company, more funds invested means higher management fees, which is excellent news for shareholders. As well as its market-beating dividend, the firm has also been buying back stock as an alternative way of returning cash to investors. So far, Man has spent $65m of its $100m share repurchase authorisation, announced in October 2018.

Management’s decision to initiate a stock buy-back, as well as the company’s 5.5% dividend yield, tells me it’s committed to returning additional capital to investors. That’s why I think this is one of the best income stocks in the FTSE 250.

As well this highly attractive cash-return strategy, shares in the company are also trading at a relatively undemanding 11 times forward earnings. With earnings growth of 60% pencilled in for 2019, the stock is trading at a PEG ratio of 0.5.

The house always wins

The other FTSE 250 income stock I think you should consider adding to your portfolio today is William Hill (LSE: WMH).

Shares in this gambling giant have been under pressure for the past 12 months due to concerns about the impact of the government’s decision to restrict the maximum stake on all fixed-odds betting terminals to just £2. The group revealed the financial cost of this decision at the beginning of March when it announced it’s writing down the value of its high street estate by £883m. Management also expects the changes to cost the business around £70m-£100m per annum in lost profits.

This is a significant setback for the group but, in my opinion, it will be more than offset by the growth of the US sports betting market. Estimates vary, but figures suggest the market could be worth $8bn by 2030 and William Hill is fighting to grab as much of the market as possible. The company has already announced several collaboration agreements with US partners and, in my opinion, concentrating on dominating this market is far more important to the business than the loss of its fixed-odds terminals.

With this being the case, I reckon it might be a good time to snap up shares in the gaming giant today and pocket the 5.7% dividend yield the stock currently offers while the US growth story plays out.

The post Looking for FTSE 250 income stocks? Here are 2 of my favourites appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

However, the one downside of using this index as an income investment is volatility. When the going gets tough, the price of the FTSE 100 can crash, and this could be enough to put some income investors off.

With that being the case, today I’m looking at an FTSE 250 income stock that offers both a higher dividend yield than the FTSE 100 and tends to thrive in volatile markets.

Market-beating income

The company is one of the world’s largest publicly-traded hedge funds and Man Group (LSE: EMG) manages around $114bn for clients around the world. The value of assets under management hit a record last year, thanks to a surge in inflows and a positive trading performance.

The company is best known for its computer-driven equity strategies, in particular its flagship AHL strategy that has been a pioneer of systematic trading since 1987. As well as the computer-driven trading business, the group also invests in private equity and infrastructure assets to help its investors achieve an attractive return.

Hedge funds like Man tend to thrive in uncertain and volatile environments because market volatility throws up opportunities that they can take advantage of quickly. I think the fact that the group’s assets under management rose to a record last year supports this argument — investors are placing their cash with the firm in the hopes that it can profit from uncertainty.

And as investors rush to give their money to the hedge fund manager, shareholders are set to benefit as well. One of the primary ways Man makes money is through investment management fees, and the more money that is deposited with the group, the higher the fee income stream. 

City analysts believe the company’s earnings per share will rise 25% for 2019 to $0.18, giving a forward P/E of just 10. At the same time, they’ve pencilled in a dividend yield of 6.1%. 

As well as returning cash to investors via a regular dividend distribution, Man is also buying back shares. The money being spent here is equivalent to an additional yield of 0.8%, giving a total shareholder yield of 6.9%.

Because Man invests in assets like private equity, where returns can be lumpy and unpredictable, the company’s earnings tend to jump around a lot. With this being the case, I think it’s appropriate to value the shares based not on profits, but on the stock’s total yield to investors.

Time to buy?

So, what’s my price target for Man? Well, based on the fact that the rest of the market is trading at a median yield of 3.9%, according to my calculations, the stock could trade up to 250p before it starts to look overvalued. At this level, the total shareholder yield would be around 3.9%, in line with the market average.

However, I don’t expect the stock to hit this level anytime soon, although I think a more conservative target of 200p might be possible.

The post I’d buy this FTSE 250 income stock over the FTSE 100 any day appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

I reckon there is a strong chance that Brexit will have little to no impact on this company’s operations. The group is the world’s third largest exporter of iron ore pellets, and almost all of its operations are located in Ukraine. 

Insulated from Brexit 

No matter what happens when (and if) the UK leaves the EU at the end of March next year, it is highly unlikely it will have a significant impact on the world’s demand for iron ore. At the same time, virtually all of Ferrexpo’s income is in US dollars, so the company is insulated from sterling volatility. Some analysts have speculated that in the event of a no-deal Brexit, sterling could fall to $1.10, which would be bad news for importers, but it would be great news for Ferrexpo shareholders because profits, on a per share basis, would jump.

What’s more, Ferrexpo is a dividend champion. The company returns as much excess cash to investors as possible and today declared a special dividend of 6.6 US cents per share, for a total of $40m. Analysts are expecting a distribution of $0.13 for the full year, giving a potential dividend yield of 5.4% at the time of writing.

Global capital 

Ferrexpo is one possible option to protect your portfolio from Brexit. Another company is Man Group (LSE: EMG). Man is one of the world’s only listed hedge funds. Its speciality is automated trading strategies, which perform best in volatile markets.

Like Ferrexpo, most of Man’s business is conducted in US dollars, and the enterprise is attracting business from around the world. Back in October, the group reported that assets under management had hit a record level thanks to booming interest from large investors around the globe. Assets under management rose to a record $114bn in the third quarter, up 0.4% from the previous quarter.

This record level of assets should, City analysts believe, translate into a boom in management fees. Analysts have pencilled in earnings per share of $0.20 for fiscal 2019, which translates into a P/E of 8.9 at the current price and exchange rate.

And just like Ferrexpo, Man is committed to returning excess cash to investors. This year, analysts believe the group’s dividend yield will hit 6.6% as it distributes a total of $0.12. A similar level of dividend income is projected for fiscal 2019.

The bottom line 

So overall, if you’re looking for income stocks that should protect your portfolio from any Brexit fallout, then I reckon Man and Ferrexpo are two of the best picks in the FTSE 250. 

Both of these companies have an international presence and are committed to returning cash to investors. With this being the case, I believe that no matter what happens to the UK after March next year, they should continue to prosper.

The post Have £2k to invest? I think these FTSE 250 dividend stocks could surge after Brexit appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

Recurring income 

Man has two primary revenue streams. Firstly, annual management fees charged based on the value of assets under management. Second, performance fees, which are only charged when the firm’s investment funds produce a certain level of performance. 

Unfortunately, due to market volatility, City analysts believe these performance fees, which make up around 25% of revenue, are likely to come in below target this year. As a result, analysts are forecasting a 14% decline in earnings per share (EPS) for 2018, as some of the decline in performance fees will be offset by higher management fee income. A few weeks ago, the company reported that assets under management had risen to a record $114bn, thanks to a surge of inflows. 

Still, even though profits are set to decline, I’m attracted to this company because the shares are changing hands for just 11.7 times forward earnings, and a dividend yield of 6.3% is on offer.  On top of the dividend yield, the group is also buying back stock. Including the buyback cash return, the total shareholder yield is just under 7%, according to market data provider Morningstar. This hefty cash return is enough to convince me that Man could be the perfect stock to hold instead of a cash ISA.

Unloved newbie

Another income play you might want to consider is Quilter (LSE: QLT). It’s only been a public company for a few months, and was formerly Old Mutual Wealth Management Ltd, attached to the Old Mutual group.

It might be untested as a public entity, but it certainly seems to have what clients want. Today, Quilter reported a net client cash flow of £1.1bn for the third quarter of 2018, and £4.1bn year-to-date, an increase of 5% on opening assets under administration. Even though third quarter flows were down slightly year-on-year, I still rate this as a positive performance, particularly as peers such as Hargreaves Lansdown have recently warned that it’s getting tough to attract new clients in the current market environment. 

Unlike so many other IPOs, Quilter came to the market with a relatively modest valuation. Based on growth estimates, the stock is trading at a forward P/E of just 10.7 for 2018. Analysts are also expecting management to announce a dividend yield of around 5p per share (around 50% of EPS), giving a dividend yield of 4.3% in the near term.

Usually, I tend to stay away from companies that have just hit the market. With Quilter, however, I’m willing to make an exception, because it’s already made a name for itself with £118bn of assets under administration. 

As the company builds a reputation as an independent entity over the next few years, I think there could be healthy returns on offer for investors.

The post I’m confident this FTSE 250 dividend play with a 7% yield can crush the income from a cash ISA appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

Tough environment

But incessantly growing competition, both from the likes of Lidl and Aldi, and from the Sainsbury-Asda merger (if it happens), could well put the annual payments under pressure. In fact, analysts are already predicting a slip to 2.8% for 2020.

The company’s latest setback at the Court of Appeal is not going to help, as judgment this week upheld a High Court verdict that it’s liable for a data breach. Employee Andrew Skelton stole payroll data, including bank and salary details, from 100,000 staff, and much of it ended up posted online.

Morrisons could now be facing compensation claims, unless it can manage to overturn the latest ruling through an appeal to the Supreme Court. With Skelton jailed for eight years, Morrisons argues that it’s not liable for his criminal misuse of the data.

Too expensive?

But the bottom line for me is that I see Morrisons shares as being on too high a valuation for such a competitive industry, with forecasts suggesting a P/E ratio as high as 17.5 for the year to January 2020. I see the sector as being unlikely to exceed average FTSE 100 dividend yields, and I can’t see those P/E multiples above the long-term average of around 14 as justifiable.

A forecast dividend yield for Tesco of 3.4% by 2020 is probably lending some support to the whole sector, but I’m not yet convinced such levels are sustainable. And Tesco is on a lower 2020 P/E than Morrisons, of under 13, with better forecast EPS growth.

More convincing dividend

For long-term pension dividends, I’ve liked the look of Man Group (LSE: EMG) for some time.

I like the idea of pooled investments as a way of spreading risk — for example, I reckon investment trusts can form a great cornerstone for a retirement portfolio. And I also see investing in a fund manager as something along the same lines, as your rewards will be dependent on how its total set of investments perform.

That’s in the long term, and an asset manager like Man Group can be affected by short-term ups and downs probably more than most. If markets are falling, for example, returns for clients won’t be so good, and Man won’t be able to charge the same performance-related fees.

Steady progress

But as there are considerably more up years than down years in stock markets, it should even out in the end. And though earnings have been volatile (and look likely to remain so), Man Group has been evening out its dividends pretty well.

Forecasts suggest big yields of 6.5% this year and 6.8% next, and I can see the cash as being sustainable over the long term. The payouts will perhaps be only thinly covered some years, but as long as there’s an overall progressive trend, I see no problems for those with a decades-long pension horizon.

The post Here’s a FTSE 250 dividend stock I’d pick for my pension ahead of the Morrisons share price appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.

Oh, Man

The statement covering its third quarter to 30 September showed a small increase in funds under management from $113.7bn to $114.bn, helped by net inflows of £400m, despite a previously announced $2.2bn client redemption. Man also posted a positive investment movement of $900m, which helped offset negative foreign exchange movements of $700m.

My worry is that Man is working to a full-year forecast of $12.2bn flows and Shore Capital reckons it needs net Q4 inflows of $3.5bn to hit that target, which requires some acceleration from here.

Strong flows

CEO Luke Ellis highlighted strong continuing inflows. “Investment performance in the quarter was mixed with strong absolute and relative performance in our momentum and discretionary long only strategies but weaker relative performance in our discretionary alternative and systematic equity strategies.”

He said Man Group is well positioned, with strong fundamentals, while my Foolish colleague Alan Oscroft reckons it has got itself into a pretty good shape for the long term. 

Opportunities

Man Group trades at a forecast valuation of 13.5 times earnings but the real attraction is its compelling forward yield, currently 6.5% with cover of 1.4. City analysts reckon earnings per share will fall 18% this calendar year then rise 27% in 2019. So the volatility looks set to continue. In my view the best time to buy volatile stocks is when they are down. Like now.

After a dismal week for global share prices the FTSE 100 was flirting with 7,000 until this morning’s rally, which has lifted it 0.49% to 7,041 at time of writing. Investors will be breathing a sigh of relief at the news, although there is doubtless more uncertainty to come.

Bulls and bears

Stock market bull runs do not die of old age, they normally need a trigger. Higher interest rates look like they could supply the bullet, or it could be the trade war, or Europe, or whatever. Nobody has a crystal ball, nobody knows.

All we know for sure is this. On May 22, the FTSE 100 hit 7,877. It is now 10% cheaper. That is what I call a buying opportunity. The index spreads your risk across 100 top UK companies that generate 77% of their revenues overseas, giving you massive global exposure, and a generous yield that stood at 4.01% at the end of September.

Buy and hold

The FTSE 100 is lower than it has been right now but it remains a global growth and income hero. You can invest in it at minimal cost through an ETF such as the iShares FTSE 100, which has ongoing charges of just 0.07% a year, so you get to keep more of the growth for yourself. Maybe buy a stake now, then buy some more in the next market dip. Then let those dividends roll up year after year while you wait for the market to recover. How long should you hold? To retirement and beyond!

The post This FTSE 250 dividend bargain’s 6% yield and the FTSE 100 could help you retire early appeared first on The Twelfth Magpie.

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harvey holds iShares FTSE 10o but has no position in any of the other 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 company, billing itself as “the UK’s leading manager and developer of student accommodation,” has seen its earnings per share more than double in the four years from 2013 to 2017. And though that rate of growth is likely to slow, first-half results on Tuesday make it look like 2018 is living up to expectations.

Unite recorded a 15% rise in EPS (with an 11% uplift currently forecast for the full year), as chief executive Richard Smith told us: “We have delivered further increases in our sustainable and recurring earnings and maintained strong cash flows.“

The beauty of that cash flow has been showing though in dividends, which have been boosted from 4.68p per share in 2013 to 22.7p last year. Cover by earnings has come down over that period as the firm moves from its early expansion phase and is starting to look more like a mature cash cow, and that was strengthened by the announcement of a 30% hike to the 2018 interim dividend. That’s slightly ahead of full-year forecasts, but is in line with the company lifting of its dividend payout ratio to 85% of EPRA earnings.

Net cash flow of £46m (up from £38m a year ago) also helped get net debt down a little, from £803m at December 2017 to £770m. But net debt should rise as Unite plans to increase capital expenditure on new investment and development.

My colleague Rupert Hargreaves recently took a look at Unite’s asset valuation figures, but suggested that the firm’s commitment to long-term sustainable earnings is really what it should be valued on. I agree.

Another strong FTSE 250 dividend

If you’re looking for another top dividend payer, Man Group (LSE: EMG) shares have been a bit erratic over the past five years — but we’re still looking at an almost doubling in price over the period.

I reckon the hedge fund manager has got itself into a pretty good shape for the long term, and it looks to me like an investment that can bring in attractive total rewards over the coming decade.

Dividends are only a part of that, with well-covered yields of 5.2% and 5.6% predicted for 2018 and 2019 respectively. On top of the annual cash, Man Group has also been buying back its own shares for some months, after announcing a total of up to $100m to be earmarked for the purpose in April.

That came after a very strong 2017, which resulted in net inflows of $12.8bn  and positive investment performance of $10.7bn. And that seems to be continuing into 2018, with the first quarter bringing net inflows of $4.8bn. But negative investment performance of $1.8bn as the quarter was described as offering “a weaker environment for equity markets and momentum strategies.“

But that’s the nature of Man’s hedge fund management approach, and I think investors should ignore performance on a quarter-by-quarter basis as that’s likely to be erratic in the short term — a caution aired by fellow Fool writer Roland Head at the time.

If you can forget short-term market movements and are looking more to building a long-term retirement nest egg, Man is a rare opportunity to invest in this market.

The post Here’s why the Unite Group share price could keep on soaring appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Increasing competition coupled with the lack of volatility in markets has hit the group’s bottom line, so management has taken action to restructure the business.

These efforts have paid off. Today the group reported a 30% increase in pre-tax profit for the year to the end of March from £11.5m to £8.8m as revenue climbed 6.6% to £151m. Profits expanded despite administrative expense growth of 4.4% from £136m to £142m. Funds under management and administration decreased year-on-year to £23.8bn from £24bn, although this figure tends to bounce around due to market movements. Discretionary funds increased by 7.9% to £12.3bn from £11.4bn.

Off the back of this robust trading performance, Charles Stanley lifted its total dividend by 33% to 8p.

Undervalued growth 

I believe, the investment group’s performance for the year to the end of March 2018 is a testament to how hard the company has worked over the past few years to turn the ship around and is a significant improvement on the net loss of £6.2m reported for 2015. What’s more, I believe this is just the start of the company’s recovery. 

According to CEO Paul Abberley, the focus of Charles Stanley in fiscal 2019 “will be on driving top-line revenue growth whilst improving operational efficiency,” as the firm seeks to leverage the changes brought in over the past five years, mainly a focus on higher-margin business. For their part, City analysts are forecasting earnings growth of 38% for the year on net profit growth of 45%. The group’s dividend distribution is expected to expand by a similar amount.

And the best part is, you don’t need to pay over the odds for this growth. Shares in Charles Stanley currently trade at a forward P/E of 14.4 and a PEG ratio of 0.5, implying that the stock is undervalued when factoring-in the growth the company is expected to produce.

Hedge your bets 

If you are not interested in Charles Stanley, there’s another City institution that also looks to be an exciting opportunity at current levels.

Man Group (LSE: EMG) is one of the world’s few publicly traded hedge funds, giving the average investor the opportunity to diversify a portfolio in a way only usually available to high-net-worth individuals.

Man’s earnings are tied to the performance of its funds, which makes for a volatile bottom line. Still, earnings volatility aside, the company has built a reputation for itself recently as an income champion. The stock currently supports a dividend yield of 5%, and analysts have pencilled in payout growth of 12% next year, giving a potential yield of 5.3%. 

Management is also returning cash via stock buybacks. Last year $350m was returned to investors via buybacks and dividends. Over the past five years, the company has returned a total of $1.5bn to investors through buybacks and dividends.

So, if you are looking for an income champion to sit alongside Charles Stanley in your portfolio, Man could be an ideal candidate. Also, while the former has warned that stock market volatility in 2019 could hamper profit growth, Man’s trading business thrives on volatility, providing a perfect hedge against uncertainty.

The post This battered small-cap could see a stunning turnaround this year appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Rupert Hargreaves owns no share 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 group reported net inflows of $4.8bn to its funds during the first quarter, taking assets under management to $112.7bn.

This figure would have been higher if it hadn’t been for a “negative investment movement” of $1.8bn. What this means is that Man’s trading strategies generated a loss for investors during the first three months of the year.

Of course, three months is a short period, during which the wider market has also fallen. The FTSE 250 fell by more than 5% during the quarter, whereas I estimate that Man’s investment loss equates to a fall of less than 1.5% in the value of its assets under management. So the group’s investments appear to have beaten the market so far this year.

The right time to buy?

The group reported surplus capital of $460m at the end of last year and has repurchased $100m of its own shares since October. A further $100m share buyback was announced today, and chief executive Luke Ellis says that the company will “continue to review further potential acquisition opportunities”.

The group’s hunt for acquisitions highlights one of the problems for investors — profits from this hedge fund group can be inconsistent. To some extent, they depend heavily on stock market movements.

Analysts expect the group’s adjusted earnings to fall from $0.20 to $0.18 per share this year. This leaves the shares trading on 14.9 times forecast earnings with a prospective yield of 4.5%. Although I think this is a well-run business, I believe there are better choices elsewhere for investors.

One stock I prefer

One company I’d choose ahead of Man is specialist small-cap fund manager Miton Group (LSE: MGR).

To some extent, the same comments apply to Miton as to Man. The group’s funds will generally do better in rising markets.

But Miton only has £3.8bn of assets under management, compared to $112.7bn at Man. I believe that this ‘small’ size means that the chance of a market-beating performance is greater.

The firm’s performance metrics seem to support this view — 87% of its funds have been in the top 50% of performers in their sector since their current managers took charge.

Another attraction is that two of the company’s senior fund managers, Martin Turner and Gervais Williams, own more than 12% of Miton’s stock between them. So it’s probably fair to assume that they encourage a culture of sustainable, long-term investing.

I’d buy again

I’ve owned Miton stock before and regret having sold the shares. But the group’s valuation remains reasonably modest and I’d consider buying again.

The board has allowed almost £20m of net cash to build up on the balance sheet, so about one quarter of the current share price is backed by surplus cash. This should provide support for the dividend if profit growth does slow at any time.

At present there’s no sign of this. Analysts expect earnings to rise by around 10% to 3.8p per share this year. That leaves the stock on 11.2 times forecast earnings with a well-covered dividend yield of 4%. I believe this is a quality business and rate the shares as a buy.

The post This FTSE 250 dividend-growth stock isn’t the first stock I’d buy after today’s news 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 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.