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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• 10% dividend yields! 3 dirt cheap stocks to consider in June?
• A dividend share yielding 10.2%! Should I buy before it’s too late?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?

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.

While the share prices of many UK-listed companies have now surpassed their pre-Covid levels, others are still lagging. One example is FTSE 250 member Moneysupermarket.com (LSE: MONY). At yesterday’s close, its valuation languished roughly 40% below where it stood in February 2020.

As someone who has tried to take advantage of this weakness by sporadically snapping up the shares, it’s only natural I’d take an interest in today’s trading update from the company. So, have I bagged myself a bargain or is this MONY nothing more than a value trap? Despite a full recovery being some way off, I still reckon it’s the former. 

Tough energy market

Sure, times are still tough at Moneysupermarket. Today, the company announced that the £76.4m in total revenue achieved over the three months to the end of September was 10% below that achieved over the same period in 2020.

The company’s Home Services arm was the biggest detractor. Revenue from this part of the mid-cap plunged 46% to £13.9m as wholesale energy prices spiked and providers withdrew tariffs. Given that Moneysupermarket’s business plan rests on people looking to save money by switching supplier, this was never going to be good news.

Ominously, MONY said today that conditions in this market were unlikely to improve for the rest of 2020. Next year could also be bleak, according to analysts. To rub salt in the wound, its Insurance business faced headwinds as markets for home and car policies “softened“. 

Signs of recovery?

This is not to say there weren’t a few chinks of light. The firm’s Money division saw a 58% jump in business, bringing in £19.7m. As the FTSE 250 member highlighted, this was close to pre-pandemic levels. MONY’s Travel arm — a huge casualty of the pandemic — also registered a 29% boost in revenue to £1.5m.

In addition, management said that full-year EBITDA (earnings before interest, tax, depreciation and amortisation) would match analyst projections due to “strong gross margin performance“. 

Cheap FTSE 250 stock

MONY shares were trading on 17 times forecast earnings at yesterday’s close. That might not seem screamingly cheap considering the multiple headwinds it faces. However, let’s look at what I’d be getting:

• A solid, very recognisable brand with exposure to multiple markets, giving some earnings diversification.
• Consistently high margins and returns on capital employed — metrics that tend to be associated with high-quality companies.
• A dividend yield of 5.4% based on analyst estimates, although admittedly, profits barely cover this payout.
• A strong balance sheet, at least relative to certain other stocks in the FTSE 250.

It seems some in the market now agree. Despite today’s so-so numbers, Moneysupermarket.com stock is currently in heavy demand. At the time of writing, the share price is up over 8% at 220p+ a pop. 

News that it would be acquiring the UK’s second-largest cashback site Quidco has no doubt helped. Already profitable and serving roughly 1 million users, the latter is expected to be earnings accretive next year.  As deals go, this one looks highly appropriate to me and may even help speed up MONY’s recovery.    

Contrarian pick

For investors with long time horizons such as myself, I reckon Moneysupermarket remains a sound buy. Having been hated for so long, the margin of safety now appears very attractive, even if the share price may take time to recapture its mojo.

I’d be happy to add to my position as things stand. 

The post I think this FTSE 250 stock is a beaten-down bargain! 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended 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.

FTSE 250 constituent Moneysupermarket.com (LSE: MONY) is having a bad 2021. In the year to date, its share price has tumbled a depressing 20%. To put this fall in perspective, the company hasn’t traded this low since 2014. 

FTSE 250 laggard

Before explaining why this strikes me as an opportunity, it’s worth reflecting on why MONY is performing so poorly.

First, we have the ubiquitous headwind that is Covid-19. It saw reduced business in 2020 as banks and financial services tightened their lending criteria in the wake of the pandemic. Naturally, a lack of people travelling abroad also meant a fall in demand for travel-related services such as insurance. 

If this wasn’t bad enough, the current energy crisis in the UK has pushed more investors to head for the exits. The rationale behind this is that fewer people will be looking to change suppliers. Even if they did contemplate doing so, fewer options would make finding a better deal tougher. Again, that could mean less traffic (and reduced earnings) for Moneysupermarket. 

Quality…on the cheap

As I type, Moneysupermarket shares trade at 17 times FY21 earnings. That may not appear ‘cheap’ in the traditional sense. In fact, dedicated value investors might scold me for using the word. Only stocks trading on single-digit earnings multiples really qualify, they might say.

But this number must always be put in context and take into account a company’s track record. On many financial ratios, MONY scores very well. Returns on capital employed — something that star investors like the UK’s own Terry Smith scrutinises — have been consistently high over the years. It also looks financially sound with a strong balance sheet.

The brand is another attraction. In an admittedly crowded field, Moneysupermarket remains one of the best-known comparison websites around. As a regular switcher, I go back to the site at least a few times every year to ensure I’m getting the most bang for my buck on utilities and insurance.

Nor am I about to turn down the dividends on offer. The consensus among analysts is that the FTSE 250 member will return 12p per share in the current financial year. That’s a yield of 5.7% at last Friday’s closing price. Adequate compensation while I await a recovery? I think so. 

All this makes me think MONY looks cheap, perhaps ludicrously so.

Patience required

Obviously, the sticky patch could continue. A resurgence of Covid-19 in the UK could drag the share price of this FTSE 250 laggard even lower. Confirmation of more energy companies going bust could do the same. Harking back to the dividend, it’s vital to note that those payouts are barely covered by profits. This may mean that MONY ends up slashing its cash returns before long if conditions don’t improve. 

The ‘endowment effect’ — the idea that I value things I own more than they are actually worth — is a possibility here too. In reality, it doesn’t matter what I think MONY’s valuation should be. It’s only worth what someone else is prepared to pay for my shares. 

Nevertheless, I refuse to let go of my contrarian mindset. I don’t see anything to make me think that MONY is just 80% of the company it was back in January. The outlook for this business is still positive once the short-term storm clouds dissipate.

At this level, I’m still a buyer.

The post 1 cheap FTSE 250 stock to buy now 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended 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.

The time to buy quality stocks is when they’re temporarily out of favour. I continue to think there’s no shortage of examples out there in the UK market. As luck would have it, one from the FTSE 250 (in which I’ve already started building a stake) reported to investors earlier today.

FTSE 250 laggard

Price comparison site owner Moneysupermarket.com (LSE: MONY) has stubbornly refused to get involved in the recovery in the UK stock market until today. Bar one or two flushes of positive momentum, its share price has been drifting lower for some time now. Today’s interim results provide some context for this. 

Revenue sank 11% to a little over £162m in the first half of 2021. Pre-tax profit fared even worse, tumbling 31% to £28m. I pretty much expected this. Like many in the market, Moneysupermarket continues to be impacted by the pandemic and the ongoing impact on consumer behaviour.

However, I think there are reasons to be optimistic. Moneysupermarket is still clearly generating a healthy amount of cash. Margins were up, as was the amount of net cash held by the company on its balance sheet.

Holding the interim dividend at 3.1p per share was another encouraging move. Sure, I’d prefer payouts to be increasing. Even so, the fact that it wasn’t reduced is indicative of confidence on the part of management.

Patience required

Naturally, the recovery won’t happen overnight. The spike in Covid-19 infections, while expected, means the rest of 2021 could still be tricky for the FTSE 250 member. The markets in which MONY operates — insurance, money (that is, cards and loans), home services (like energy), and travel — are also “recovering at different rates“, according to the company.

Even so, CEO Peter Duffy did say that he expected “more normal trading conditions” for the company’s markets next year. This may explain why the shares are up strongly today. I personally think we’ll see a dramatic improvement in revenue at MONY’s travel insurance arm as restrictions lift overseas. 

At 19 times earnings before markets opened, MONY still looks like a bargain to me. I’d feel comfortable buying more today. 

Another bargain?

Another company that’s seen buying pressure this morning has been online pension provider PensionBee (LSE: PBEE). Like Moneysupermarket, this new-stock-on-the-block also released half-year numbers to the market today. 

Helped by increased marketing, PensionBee has been attracting more people to its services. Invested customers rose 81% to 92,000 over the reporting period. Perhaps we shouldn’t be surprised by this. Make of it what you will, but PBEE was named as a ‘Best Buy’ in five categories at this year’s Boring Money Awards.

Most importantly, it seems to be hanging on to its customers. Retention rates remained at more than 95%. At £2bn, assets under administration (AUA) were also more than double that seen at this point in 2020. 

Based on today’s numbers and the potential demand for online pension consolidation going forward, I wonder if the shares may turn out to be another bargain in time. Right now, however, I think it’s wise to keep my feet on the ground. PBEE remains loss-making (and won’t be profitable until the end of 2023, according to the company). That’s a long time to keep my money tied up in an illiquid stock. 

Despite today’s encouraging share price rise, I’ll only be adding this promising small-cap to my watchlist for now.

The post This FTSE 250 stock still looks a bargain to me! 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended 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.

Record results 

Not every company has suffered at the hands of the coronavirus. For evidence, take a look at today’s record results from online trading platform Plus500 (LSE: PLUS). 

Total revenue soared a massive 146% to $872.5m in 2020, thanks to “unprecedented levels of platform usage“. A total of 82 million trades were placed by customers over the period, compared to around 35 million in 2019. This goes some way to highlighting just how popular trading has become over the multiple lockdowns we’ve endured.

Naturally, there’ll come a time when markets and trading activity begin to settle.  Indeed, Plus500 said today is expected revenue in 2021 to “grow from more normalised levels” achieved in 2019.

Even so, I think the dividends on offer still make Plus an attractive option for those looking for income. Right now, analysts are predicting it will return 83.6 cents per share (60p) in FY21. That becomes a yield of 4.4% at today’s share price. As well as being far better than the interest rates offered by even the best Cash ISA, this income looks likely to be easily covered by profits.

Naturally, Plus500 won’t be to every investor’s taste. The ongoing threat of regulation in its industry could keep the share price in check, even if the company succeeds in becoming a “multi-asset fintech group“. This may be one reason why the FTSE 250 member’s valuation — at just 9 times forecast earnings — appears low relative to the market as a whole.

For those looking for their dividend fix, but wary of buying Plus at its peak, I think there’s a great alternative in the index. 

Quality… on the cheap

Another FTSE 250 stock offering great income right now is price comparison site Moneysupermarket.com (LSE: MONY). In fact, this is one of the reasons I began building a position in the company last year.

Analysts currently have the company returning 11.3p in FY21. That translates to a yield of 4.2%. I think that’s sufficient compensation for being patient while trading recovers. In spite of the foggy earnings outlook, I suspect we could see a big increase in demand for the company’s services from UK holidaymakers looking for travel insurance once restrictions are lifted.

Sure, MONY isn’t without risk. It’s certainly not the only option for those looking to compare prices on financial products. There’s also the opportunity cost of not investing elsewhere to consider. After all, the share price has been stuck in the 200p-400p range for the last six years! To me, this would imply that big capital gains look unlikely in the near term.

Nevertheless, I like the valuation. A forecast price-to-earnings (P/E) ratio of 18 feels reasonable for a company that has the quality hallmarks I look for. These include a good brand, net cash on the balance sheet and high operating margins.

On top of this, MONY also generates great returns on capital employed — a key metric used by fund managers such as Nick Train and Terry Smith to separate the wheat from the chaff. 

The post 2 of the best FTSE 250 dividend shares to buy in the UK today 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• £20,000 in an ISA? Here’s how you can aim for an £833 monthly passive income
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended 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.

FTSE 250 contrarian play

Like most in the market, online price comparison site Moneysupermarket.com (LSE: MONY) hasn’t had the easiest 2020 so far. In its most recent update, the FTSE 250 member revealed a 16% decline in revenue over Q3, due to travel restrictions and banks pulling products from the market.

But let’s not get distracted by a temporary period of troublesome trading — Moneysupermarket still ticks many boxes on a quality-focused investing checklist:

• Sky-high returns on capital employed? Check.
• Huge operating margins? Check.
• A strong brand? Check.
• Net cash on the balance sheet? Check (£5m).
• Still paying dividends? Check.

In addition to all this, Moneysupermarket should benefit from a rush for travel insurance when people start flying again. Even those that aren’t so inclined to travel will still be wanting to use the site to save money on monthly bills. 

Could I make greater gains buying battered travel and leisure stocks? Quite possibly. The issue with this strategy, however, is that many of these simply aren’t very good businesses when it comes to making money for their shareholders. And, as Warren Buffett would surely attest, it’s the quality of a business that really matters in the long run.

Assuming things do get back to normal next year, Moneysupermarket shares trade at 17 times forecast FY21 earnings. That still looks great value to me, considering the five-year average PE of 22.

Down but not out

A second battered FTSE 250 stock I’ve bought more of in November is high-performance polymer supplier Victrex (LSE: VCT). Like Moneysupermarket, recent trading hasn’t been great, due to the chaos caused by the coronavirus.

Last month’s update spoke of end markets remaining “subdued” after sales volume and revenue fell 26% (to 695 tonnes) and 27% (to £55,7m) respectively in Q4. Job cuts will help mitigate the company’s high fixed costs, but it’s hardly the sort of news to make investors bullish. There’s also Brexit to ponder.

As negative as this sounds, Victrex remains a classy operator. Let’s look at some of the attractions: 

• High returns on capital employed? Check.
• High operating margins? Check.
• Operating in multiple industries. Check.
• A market leader in what it does? Check.
• Lots of net cash on the balance sheet? Check (£67.4m).
• Dividends? Check (a dividend for FY2020 is expected).
• Growth opportunities? Check.

Thanks to its exposure to the aerospace industry, I also think Victrex is another good ‘picks and shovels’ play on the recovery in travel. Tapping into the growing trend for green investments, the company’s lightweight thermoplastics help make aircraft more fuel-efficient and environmentally friendly.

Play the long game

Naturally, big gains won’t come overnight. As an investor however, it pays to distinguish between short-term hurdles and game-changing problems. The coronavirus, I submit, is the former.

A valuation of 24 times forecast earnings does look dear, given current headwinds, but this should reduce as profits recover over the next couple of years. Just like star UK fund manager Terry Smith, I think price is of secondary importance compared to buying a great company with solid growth prospects. This belief certainly hasn’t adversely affected the performance of his Fundsmith Equity Fund.

Victrex’s eventual rebound should be worth the wait.  

The post Stock market rally! Here are 2 FTSE 250 shares I’ve been buying for the next bull run 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• With a 9.5% yield, this FTSE 250 dividend share could climb up to 40%!
• Could a portfolio of dividend shares turn £10,000 into £20,097 in 10 years?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?

Paul Summers owns shares of Moneysupermarket.com and Victrex. The Motley Fool UK has recommended Moneysupermarket.com and Victrex. 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.

For a long-term investor, future gains are the silver lining to the stock market doom and gloom. And since higher returns can be made from lower share prices, a bear market is a much better time to be building your wealth. Cheap FTSE stocks are safer investments than those made at the height of a bull market.

Long-term investors need to find good cheap companies that will thrive in any market. Investing £1,000 in each of the two shares below could be a great place to start.

Ashtead

Ashtead Group (LSE: AHT) is a provider of industrial equipment rentals. Its main business is in North America where it operates as Sunbelt, supplying many types of customers from construction to the entertainment industry.

Ashtead boasts an impressive track record of adapting its business model to the macroeconomic backdrop. This performance is underpinned by strong returns on invested capital that have resulted in a steadily climbing share price over the last decade.

There every reason to believe Ashtead will continue its ascent. It has many business advantages at its disposal and will be able to use its scale, differentiation, and cash levers to manage the downturn. In the US, rising equipment costs and changing health and safety regulations will likely provide further rental opportunities. Additionally, the downturn itself may uncover further acquisition prospects, consolidating its position.

Ashtead’s £500m buyback policy offers alluring returns for shareholders, although a yield at under 2% may not be the most attractive. However, the dividend per share has increased every year over at least the last five years. The company’s cash reserves imply it’s affordable.

Ashtead is currently on sale for around 2,130p, with some analysts giving the firm a fair value of 2,800p.

Moneysupermarket.com

Moneysupermarket.com (LSE: MONY) is the UK’s largest provider of online price comparison services. It owns four major trading brands in MoneySuperMarket, MoneySavingExpert, TravleSuperMarket, and Decision Tech. About half the group’s revenues come from insurance, 22% from money, and 17% from home services, such as electricity providers.

Moneysupermarket’s strong competitive position comes from its big size and ability to differentiate itself from its competitors. It aims to sustain this lead by offering a new energy switching service that tailors its offerings between low-cost products and those with other specific features.

However, since Moneysupermarket’s revenues are directly related to the services it promotes, the coming recession could adversely affect its travel and money streams. That said, this will likely be offset by growing revenues from its insurance products, as premiums rise due to increasing payouts from Ogden rate changes. 

Moneysupermarket has a solid set of financials. Excellent sustained revenue growth, profitability, and cash generation ability gives the group a well-earned reputation for dependable dividends. Its current yield is a decent 3.6%.     

Both Moneysupermarket and Ashtead are dependable and cheap FTSE stocks I want in my diversified portfolio. To maximise returns, I would buy them both right now.

The post Got £2k to invest? I’d buy these cheap FTSE stocks right now 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

If you’re going to dip your toe into choppy waters and invest for the long term, you may as well focus on quality growth stocks.

This is what I think (hope) I’ve done with two new additions to my own portfolio this month. Drum roll, please…

Market leader

Some might baulk at my decision to begin building a stake in property portal Rightmove (LSE: RMV). After all, the housing market has pretty much collapsed since the outbreak of the coronavirus outbreak and could struggle to bounce back in its aftermath.

So, what’s got me buying? There are a few reasons.

First, FTSE 100 constituent Rightmove is the undisputed market leader in what it does. For many, it is the housing market. All attempts by competitors to snatch user eyeballs to date have failed. That’s the sort of economic moat I look for.

Second, this is a company that generates staggeringly high returns on capital employed (ROCE). This is the amount of profit it makes relative to the money it invests in the business.

For fund managers like Terry Smith, ROCE is one of the key metrics to look for when ascertaining whether it’s worth buying a particular growth stock. And he’s not done too badly with this strategy. 

Third, Rightmove has a great balance sheet with £24m net cash at the end of 2019. The recent decision to withdraw the final dividend will help bolster things further.

Fourth, Rightmove’s share price — at the time of writing — is 30% down from where it peaked in February. While anchoring to a historic price should be avoided, I suspect a fair bit of negativity is already priced in. 

But might the shares continue falling? Absolutely! And it’s for this reason I’ve only put a very small amount of my capital to work for now.

Another top growth stock

A second company I’ve started buying in April shares a lot of Rightmove’s characteristics and attractions. It’s an online business with a great brand, high returns on capital and stonking margins. Unlike Rightmove, however, this company’s services are popular with those looking to save rather than spend money.

Step forward price comparison specialist Moneysupermarket.com (LSE: MONY). If we truly are heading for the mother of all recessions then I think it likely traffic to the FTSE 250 member’s site will only increase.

People will still need to renew contracts and policies in tough times, but they’ll be more motivated than ever to do so as cheaply as possible. While dependent on what providers, such as banks and insurance companies, are willing to offer consumers, the firm’s multiple revenue streams should also give it some protection, even if some products are withdrawn. 

Like Rightmove, Moneysupermarket’s finances look steady. The company had net cash of £30m at the end of March and has decided to go ahead with paying its final dividend for last year.

Again, I’ve only bought a small slice for now. But I’ll definitely be looking to add more if (and that’s a sizeable ‘IF’) markets sink back to levels seen in March. 

The post This FTSE 100 giant isn’t the only growth stock I’ve started buying 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?
• This FTSE 250 stock could storm back into the FTSE 100 with an 80% rise, 1 broker says
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

Paul Summers owns shares in Moneysupermarket.com and Rightmove. The Motley Fool UK has recommended Moneysupermarket.com and Rightmove. 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.

Great gains

I last checked in with fantasy figurine maker Games Workshop (LSE: GAW) in March. Back then, I suggested its stock was still worth buying, despite being on a higher valuation relative to its average over the last five years. Games is up 56% since.

Whether this kind of form can be sustained in the near term is hard to say. On one hand, trading remains excellent with the mid-cap recently saying it expects sales and pre-tax profit for the year to 2 June to be roughly £254m and “no less than” £80m, respectively. The fact it rewarded staff with a total of £5m in bonuses over the last year should also keep them incentivised to hit targets.

On the other hand, Games now boasts a price/earnings to growth (PEG) ratio of 4.9, suggesting prospective buyers will now be paying a very high price relative how quickly profits are expected to rise. This remains a great company but one I’d now be more tempted to catch once things cool down. 

Another stock that’s in danger of being issued with a speeding ticket is price comparison website Moneysupermarket.com (LSE: MONY). If you’d bought shares in mid-December, you’d be toasting a gain of around 50%. 

This performance has been backed up with some decent trading. As my Foolish colleague Harvey Jones reported in April, Moneysupermarket’s decision to rebrand itself has been positively received by customers. Q1 revenues rose 19%, for example.

As you might expect, the £2.1bn-cap scores highly on quality indicators, such as high returns on capital employed and operating margins — not unlike property portal Rightmove and automotive marketplace Autotrader.

By contrast however, Moneysupermarket offers a far better yield of 3.5%. That’s not the biggest you can find in the FTSE 250, but it’s good for what has traditionally perceived as a growth stock. 

Perhaps the most surprising of today’s terrific three is homeware retailer Dunelm Group (LSE: DNLM). I’ve been wary of the company in the past due to the huge competition it faces. Going by recent trading however, the £2bn-cap is certainly proving me wrong. 

As a result of “very good like for like growth” in the last couple of months and “unseasonably favourable weather conditions” so far in 2019, management now anticipates pre-tax profit for the financial year will come in ahead of previous expectations, at around £124m-£126m.

Dunelm’s stock is now a stonking 82% higher than it was at this time last year and trades on a PEG of 3.9 (far higher than the 1.0 or less legendary growth investor Jim Slater encouraged investors to search for).

With no sign the UK is to bask in a heatwave anytime soon however, it’s possible the shares might continue creeping up until full-year figures are confirmed. 

Buyer beware

Naturally, what’s popular in the market is rarely inexpensive and that’s the case with all of the above. Forecast price-to-earnings (P/E) ratios for Games Workshop, Moneysupermarket.com and Dunelm Group are 25, 22 and 20, respectively.  

As such, it’s worth considering how likely it is that holders will continue to be satisfied by results. With high expectations comes a greater chance of being disappointed. 

The post These FTSE 250 stocks keep rising. Is there more to come? appeared first on The Twelfth Magpie.

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• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

My research has identified three FTSE 250 dividend stocks that could be of interest. I reckon this trio could deliver a market-beating mix of income and growth over the coming years.

A global view

Recruitment firm PageGroup (LSE: PAGE) may have its roots in the UK, but today it’s a truly global business. That means the group’s exposure to local risks, such as Brexit, should be limited.

Trading figures released today suggest to me that this approach is still working well. During the final quarter of 2018, gross profit rose by 15.4% compared to the same period a year earlier.

Highlights included a 22% rise in Asia Pacific and a 32% increase in the USA. Even the UK managed a 2.1% gain, despite Brexit uncertainty dampening hiring activity.

Despite this solid performance, the shares are down 5% at the time of writing. One reason for this is probably that today’s figures are in line with existing market forecasts. So there’s no surprise reason for short-term traders to push up the share price.

However, for Foolish long-term investors, I think this diversified recruiter could be worth a look. PageGroup ended the year with net cash of nearly £100m, and offers a forecast dividend yield of 5%. I’d buy.

This compares very well

One of my favourite technology stocks is price comparison website Moneysupermarket.com Group (LSE: MONY). I like it because it’s very profitable, with an operating margin of 30%. Capital expenditure is also limited, because the only thing the firm has to pay for is marketing and software development.

These qualities mean that Moneysupermarket generates a lot of surplus cash. This has enabled management to increase the dividend by an average of 12.6% per year since 2012. This has provided shareholders with an income that’s risen much faster than inflation or wages.

One potential concern is that this business is now fairly mature, with limited growth potential. This may be true, but I don’t think investors should rule out future growth. The company is currently investing in its next generation of comparison services, which are said to include automated switching and mortgage comparison.

Even without these new offerings, the group still managed to generate 6% revenue growth during the first nine months of 2018.

With new products and services on the way, I think the future looks promising. In the meantime, the shares offer a well-supported yield of 3.7% and remain on my buy list.

A recovery buy

For shareholders in temporary power generation group Aggreko (LSE: AGK), the last six years have been tough. The group’s share price has fallen by 65% from its all-time highs of 2,300p+ in September 2012.

However, the group’s underlying revenue rose by 11% during the first nine months of 2018 and Aggreko has reported a number of new contract wins recently. Broker forecasts suggest profits could rise by 7% in 2019.

I see this as a good long-term business that’s large enough to adapt to changing market conditions. The shares look affordable to me, on 14.5 times 2019 forecast earnings, and with a 3.6% dividend yield. Now could be a good time to buy, before the market wakes up to this long-awaited turnaround.

The post Have £3k to invest? 3 FTSE 250 dividend stocks I’d buy and hold for 10 years 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?
• How much would a portfolio of income shares need to be worth to produce £32,700 a year in retirement?
• How much would investors have to invest in this FTSE dividend giant to target £16,771 a year in passive income?
• With a 6.9% yield, is this one of the best FTSE 250 stocks for passive income?

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