The good news is that there are still many bargain dividend payers around. Here are three from the FTSE 250 that I’d buy right now if passive income were my goal.

Passive income powerhouse

Yesterday’s brief trading update from online trading platform provider IG Group (LSE: IGG) was well received by the market and it’s not hard to see why. 

Thanks to traders remaining active, IG now believes net trading revenue for the first six months of FY21 will come in at around £416m. That’s a stonking increase of 67% compared to the same period in the previous year. 

Naturally, there will come a time when the market becomes less volatile and IG’s trading volumes normalise. Even so, I still think the shares are worth grabbing for the dividends on offer. Another 43.2p per share return in this financial year gives a yield of 5.1% at the current share price. That’s far better than the ridiculously low 0.6% offered by the best instant access Cash ISA

What’s more, IG’s shares still trade on just 14 times expected earnings. I think that’s got to be a steal for such a high-quality, industry-leading firm.

Sweet yield

Ingredients supplier Tate & Lyle (LSE: TATE) is another FTSE 250 member offering a juicy passive income stream right now. 

Last month, the company revealed some better-than-expected numbers from the six months of trading to the end of September. These included a 1% and 9% rise in revenue and profit respectively at its Food & Beverage Solutions division. Its other business — Primary Products — “delivered steady earnings despite a significant reduction in out-of-home consumption in North America”. 

Like IG, shares in Tate don’t look particularly expensive. A price-to-earnings (P/E) ratio of 12 for the current financial year looks very fair to me, even if the company is still cautious about trading going forward.  

And the dividends? A possible 30p per share cash return gives a yield of 4.5% at the current share price. What’s more, this payout is expected to be covered 1.8 times by profits, suggesting it’s unlikely to be cut any time soon.

Drink in those dividends

A final stock from the FTSE 250 that I think should continue generating passive income for holders is soft drinks giant Britvic (LSE: BVIC).

Last month’s results for the year to the end of September were adequate enough given the impact of the pandemic. Although revenue fell 6.8% to £1.41m, post-tax profit rose almost 17% to £94.6m. The company also highlighted that it has extended its UK bottling deal with PepsiCo for another 20 years.

Most importantly for passive income seekers, Britvic confirmed a 21.6p dividend for the full year. This gives it a trailing yield of 2.7%.

Given that the soft drinks industry tends to bounce back strongly after setbacks, I see no reason why this company won’t increase its cash returns to holders. Indeed, if analysts are correct, the company could return 26.9p per share return in the new financial year. That gives a yield of 3.3%!

Trading on 15 times earnings, Britvic remains another highly tempting dividend pick, in my view. I’d buy.

The post I’d spend £3k right now on these cheap FTSE 250 dividend stocks for passive income appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK 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.

The world hasn’t yet found a way of living without oil. So, I’m confident about my portfolio in the long term. However, oil price volatility is concerning. And it’s more troubling now than usual because it is combined with the effects the coronavirus-induced economic shut-down.

In these circumstances, it makes sense to try to protect your passive income from as many market volatilities as possible. A balanced, all-weather portfolio can help to achieve this. And in a recession, defensive stocks can be a real comfort blanket.

Firms in this sector sell goods in constant demand that meet physiological needs. When money is tight, peoples’ spending priorities are on essential items, not buying oil stocks. And these are often reflected in the profitability of those businesses that provide accordingly.

Two best defensive shares

Indeed, hygiene-product seller, Reckitt Benckiser (LSE: RB) depends on hygiene product revenue for 25% of its business. Reckitt owns many well-known brands including Dettol, Harpic, and Cillit Bang. Sales for these items are currently growing due to the Covid-19 pandemic. This should help the firm grow its revenue, profitability, and, hopefully, dividend income.

Moreover, Reckitt’s recent purchase of baby formula maker Mead Johnson provides the consumer staples giant with an extremely profitable consumer health business. And another category leader with pricing power. After a relatively flat period, its long-term prospects are good. 

Food is another essential good. I think FTSE 250 star Tate & Lyle (LSE: TATE) is a hidden gem. Tate’s stock has risen by about 75% over the last 10 years but this trend is often overshadowed by the disappointing share price performance of 2016 and 2018.

However, the business has refocused since then. Tate’s 2019 half-yearly results showed sales up 2% and operating profit up 3% from 2018. Its efficiency measures appear to be working and the firm is looking for acquisitions to grow its food and beverage solutions division. Indeed, the firm is currently outperforming the FTSE 250.

Passive income stars

I think both these companies are passive income stars.

Reckitt Benckiser is one of the Top 20 FTSE 100 dividend payers for passive income. These are the few companies that pay out the bulk of dividends across the index. The 2.69% yield is not bad and with a dividend cover of 1.88, it is affordable. Reckitt is currently trading around 6,474p, with HSBC giving it a price target of 6,800p. So, there may be room for growth here too.

Tate & Lyle boasts a juicy yield of just under 4.4.%, high for the food sector. Its dividend cover is 1.64, meaning your passive income is well covered by the firm’s earnings. Also, its dividend per share has improved from 23p to 29p over the last 10 years. And the firm has never missed a payment.

A dividend stock should provide you with a stable passive income by being reliable, unlike oil stocks. Both of these companies have demonstrated this over time. Neither Reckitt nor Tate are likely to offer you big upsides in a bull market. But right now, the predictable nature of the businesses and the sustainable dividends on offer are trade-offs I’m delighted to make.

The post Forget oil stocks! I’d buy these 2 best shares now for passive income appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch 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.

Today I want to look at two stocks which I think should provide reliable dividends and growth for the foreseeable future.

An essential ingredient?

Tate & Lyle (LSE: TATE) is a familiar brand, but the Tate & Lyle-branded products you buy at the supermarket are probably made by American Sugar Refining, which bought Tate’s European sugar business in 2010.

Although the company does still produce some bulk ingredients, such as starch and corn fructose syrup, its main growth focus is specialist ingredients used by food producers.

Many of these products are used by major food brands. They are generally harder to substitute with cheaper alternatives than commodity-type ingredients like granulated sugar. This makes them more profitable.

Another very profitable area of the group’s business is its Sucralose sweetener division, whose main brand is Splenda.

Long-term opportunity

I’ve pulled some numbers from last year’s results so you can see how the group’s profit margins vary across its business:

In my view, this points to a long-term opportunity. Higher profit margins in the speciality ingredients and Sucralose businesses mean that if sales rise, profits will rise more quickly than they would from bulk ingredients sales.

Even if that doesn’t happen, I think Tate & Lyle has the qualities needed for a long-term investment. The group hasn’t cut its dividend for 21 years. Profits margins are fairly stable and cash generation is good, with only a limited amount of debt.

The stock also looks affordable to me, on 14 times 2019 earnings with a 4.2% dividend yield. I’d be happy to buy these shares today and never trade them again.

We can’t get enough

My second pick also comes from the food industry, which I see as a good defensive option for the long term. After all, whatever else happens, we can’t stop eating.

And it seems that one food we can’t get enough of is meat. Hilton Food Group (LSE: HFG) specialises in producing meat products for supermarket chains in the UK and other developed markets.

Hilton’s share price has risen by 80% over the last five years and by 430% since its flotation in 2007. Over the last five years, sales have risen by 50%, while pre-tax profits have risen by 72%.

More to come?

Management isn’t stopping there. The last two years have seen significant investment in the business. The acquisition of seafood supplier Seachill helped to expand the group’s product range into new markets. Meanwhile, new plants are expected to open in New Zealand and Australia in 2019 and 2020, supporting further growth.

One risk for investors is that most of the group’s sales come from just a handful of big customers. The shares aren’t cheap either. As I write, they trade on 21 times 2019 forecast earnings and offer a dividend yield of just 2.4%.

However, I see this as a good business that’s well run. For long-term investors, I think this could be a fair price to pay.

The post 2 dividend stocks I think will pay you for the rest of your life 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.

To me, that’s an underwhelming outcome that makes me question whether it’s worth taking on the risk of investing in the firm, even though the forward dividend yield is running at around 4.4%, which looks attractive at first glance.

Low expectations

I reckon the company should be growing more than it is in the current economic environment because I think there’s a fair bit of cyclicality in the firm’s operations. That’s certainly what the share-price chart suggests when you look at the dips and plunges over the years. Indeed, City analysts watching the company are predicting broadly flat earnings out to March 2020.

Today’s half-year report shows adjusted revenue 2% higher than the equivalent period last year and adjusted diluted earnings per share up 5%. Net debt fell 14% to £337m, but I’d like to see much brisker trading and the company paying down bigger chunks of its borrowings in what should be the good times for trading right now. The directors pushed up the interim dividend by 2.4%.

Chief executive Nick Hampton said in the report that the firm performed “in line” with the directors’ expectations, despite cost inflation from materials and transport in North America, and lower profits in its commodities division. Meanwhile, the firm aims to stimulate growth in its business with three programmes it announced in May to “sharpen the focus on our customers, accelerate portfolio development and simplify the business.” Hampton said the initiatives are progressing well.

Where’s the attraction?

But there’s nothing much to latch onto that makes me become excited about the stock, or the firm’s potential. There’s no fast-growing division, no amazing new product in development, and no recent acquisition that will transform the prospects of the business. I think holding the shares would expose me to all the downside risks you get when you hold shares in an individual company, but without rising earnings or a compelling upside case to balance those risks.

So I’d rather invest in the market itself than in Tate & Lyle by buying into a passive, low-cost index-tracking fund that automatically reinvests dividends back in. I could invest in a fund that aims to replicate the returns of the FTSE All Share Index, but my preferred option is to invest in a tracker that follows the FTSE 100 index. I’m bullish on the prospects of the FTSE 100 and if I invest in a tracker fund, my money will automatically be spread across 100 companies, which would iron out the risk I’d face by investing in just one firm such as Tate & Lyle.

The post What I’d buy instead of this more-than-4%-yielding FTSE 250 share appeared first on The Twelfth Magpie.

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• UK shares: there’s a reason so many foreign buyers are circling!

Kevin Godbold 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.

With this in mind, today I’m going to take a look at two FTSE 250 stocks which seem to offer both enticing valuations and dividend appeal.

Tate & Lyle

First up is food ingredients maker Tate & Lyle (LSE: TATE). The company, which sold its sugar refining business in 2010, now makes its money from selling ingredients such as sweeteners, texturants and fibres to food manufacturers.

It has had a difficult few years amid a price war in the sucralose market, but has since made great efforts to diversify away from the commodity. With the launch of new products in the bulk ingredients business, Tate & Lyle has delivered broad-based volume growth, along with steady margin improvement.

What’s more, although market conditions remain challenging in North America, competition in most markets has eased considerably, leading to a stabilisation in prices. Free cash flow has also improved noticeably, leading the company to resume dividend growth for the first time since 2015.

Improving outlook

Turning to the outlook, total dividends per share are expected to grow from 28p in 2017, to 28.6p this year, giving prospective investors a dividend yield of 4.9%.

On the earnings front, Tate & Lyle expects underlying pre-tax profits for the full year to be ahead of previous expectations. City analysts currently have forecasts for the company to record a rise in adjusted earnings of 3% this year, with further growth of 2% forecast for next year. As such, valuations are undemanding, with shares trading at 11.3 times its expected earnings in 2019.

esure

Meanwhile, in the motor insurance sector, esure (LSE: ESUR) offers even more income, with a prospective dividend yield of 5.6% next year.

The internet and telephone-based insurer is often overlooked by its larger rivals, but the company deserves more attention than it gets. esure has a strong track record of profitability and looking ahead, it seems well placed within to cope with changes affecting the insurance sector compared to its peers.

The company has been less badly affected by the UK government’s recent change in the Ogden discount rate, which increased the cost of personal injury claims, due to its lower-risk approach to underwriting and conservative reinsurance programme. And as it emerges from a relative position of strength, it’s well placed to benefit from stronger pricing in premiums going forward.

Double-digit earnings growth 

Looking ahead, City analysts offer upbeat forecasts on earnings growth. Although adjusted earnings is set to have fallen by 3% in 2017, they expect a strong rebound in 2018 and 2019, with earnings growth of 12% and 10%, respectively.

Despite this, valuations are inexpensive, with a 2018 forward P/E of 11 comparing favourably against the sector average of 13.1.

The post 2 FTSE 250 dividend stocks on sale appeared first on The Twelfth Magpie.

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• UK shares: there’s a reason so many foreign buyers are circling!

Jack Tang 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.

Defence dynamo

Shares in defence giant QinetiQ (LSE: QQ) crept to two-and-half-month peaks this week in the lead-up to Thursday’s full-year results. And investor faith appears to have been rewarded even though the engineer saw revenues slip 1% during the 12 months to March 2016, to £755.7m, while pre-tax profit slumped 14% to £90.2m.

But QinetiQ’s sales outlook appears to be steadily improving, the company enjoying an 8% boost in its order book — to £659.8m — thanks to a £153m, five-year renewal contract with the Ministry of Defence for aircraft engineering support.

Furthermore, QinetiQ advised that 74% of revenues for fiscal 2017 were covered as of the start of April.

With defence budgets back on the mend, the City expects QinetiQ to enjoy an earnings advance of 1% in both 2017 and 2018, resulting in very-decent P/E ratios of 14.9 times and 14.6 times, respectively. And dividend yields of 2.6% for 2017 and 2.9 % for 2018 provide a handy-if-unspectacular sweetener.

Paying off

Payments specialist Paypoint (LSE: PAY) also enjoyed a bump in Thursday business, a 2% advance sending the stock to levels not seen since early January.

Paypoint advised that pre-tax profits careered 84% lower in the year to March 2016, to £8.2m, the business hammered by a £30.8m impairment on its outgoing mobile payments division.

Revenues at Paypoint slipped 3% during the period, to £212.6m, although the company remains bullish over its long-term outlook as it develops its retail services. Indeed, Paypoint saw the number of retail transactions shoot 17.8% higher last year, to 140m.

The number crunchers certainly believe Paypoint is on the way up, and have pencilled-in earnings rises of 20% and 7% for 2017 and 2018. These figures produce excellent P/E ratings of 13.4 times and 12.7 times.

And dividend hunters will no doubt be attracted by huge dividend yields of 5.4% for this year and 5.8% for 2018.

Too sweet

Sugar play Tate & Lyle (LSE: TATE) has proved one of the stars of the show on Thursday, the stock gaining 2% and reaching levels not seen since last April in the process.

Tate & Lyle announced that sales edged fractionally higher during the year to March, to £2.36bn, although investors cheered news that adjusted pre-tax profits nudged 5% higher to £193m.

The food play posted a mixed set of sales results. Revenues at its Specialty Food Ingredients arm nudging 4% higher from 2015, to £897m. But Tate & Lyle’s Bulk Ingredients arm continues to struggle, and sales here dipped 1% to £1.46bn.

The City expects restructuring at the sugar giant to keep driving earnings higher, and rises of 7% and 6% are expected in 2017 and 2018, resulting in P/E ratings of 16.6 times and 15.5 times.

However, dividend yields of 4.7% for this year and 4.8% for 2018 help to offset these middling multiples.

Still, I believe Tate & Lyle still has plenty of work ahead of it to turn around its Bulk Ingredients business, while adverse currency movements add a further headache for the business. I reckon the stock’s turnaround story still leaves plenty of questions to be answered.

The post Should you buy Tate & Lyle plc, QinetiQ Group plc and Paypoint plc following today’s updates? appeared first on The Twelfth Magpie.

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