However, since Monday’s low, the index has started recovering. As I type (25 March), it’s up to 10,077.

So, is the FTSE 100 back on track? Let’s discuss.

What’s the latest?

Obviously the event that triggered all the stock market uncertainty is the Iran war. Or, more specifically, the lack of shipping going through the Strait of Hormuz.

The longer this goes on, the worse inflation will be due to disrupted oil, gas, and fertiliser supplies. The current energy crisis is perhaps the worst in decades.

Research from Vanguard earlier this month shows the economic damage that could be caused by a protracted conflict. Europe (including the UK) and Japan are particularly vulnerable to high oil prices.

As we’re all aware, things change hour by hour with President Trump’s policies. The latest is that Iran has — unsurprisingly — rejected a 15-point plan from Washington to end the conflict.

The Footsie is cheap

Needless to say then, it’s too early to tell whether the FTSE 100 is back on track. We don’t yet know the inflationary damage to the UK economy or whether the US and Iran are even talking to one another.

Either way, interest rates are likely going up in 2026. So investors probably aren’t going to be in the mood for higher-risk assets.

But that might benefit the FTSE 100 to some degree, as it’s cheap and many constituents pay generous dividends (the index yield has climbed to 3.2%).

Some might be perfectly satisfied to buy cheap FTSE 100 blue chips, collect any dividends, and wait for a potential snapback rally later this year. If so, investors could consider something like the Vanguard FTSE 100 UCITS ETF.

Perspective helps

When unpredictable events like this develop, I think it helps to keep some perspective as a long-term investor.

For example, look at this chart below from Scottish American Investment Company (LSE:SAIN), or ‘SAINTS’. It shows how the FTSE 250 investment trust has pumped out inflation-busting dividends for many decades.

There were multiple oil crises, recessions, and stock market crashes over this period. And some very scary geopolitical events. Yet most of the stocks SAINTS invested in proved resilient enough to pay rising dividends.

And the stock market went up and to the right over time.

But is SAINTS worth considering today? I reckon it might be for investors looking for a steady dividend-paying trust that aims to grow income above inflation. Yielding 3.25%, it has increased the payout for 52 consecutive years.

Top holdings include Taiwan Semiconductor Manufacturing, Apple, Microsoft, and Procter & Gamble.

That said, performance has been disappointing lately, with SAINTS’ ‘quality’ investing style out of favour. Last year, the share price returned just 6.8% versus the FTSE All‑World Index‘s total return of 14.7%.

If performance doesn’t pick up, more investors could dump the shares, widening the current 8.2% discount to net asset value.

On balance, however, I think the potential rewards outweigh the risks. Last year, shareholders enjoyed a 7% increase in the dividend, twice the rate of inflation.

The post Back above 10,000! Is the FTSE 100 index on track again? appeared first on The Twelfth Magpie.

High-yield hero

Investors need to tread carefully when choosing dividend shares with ultra-high yields. This can reflect a nosediving share price; underlying problems like a weak balance sheet; and/or a dividend policy that is unsustainable over time.

Fortunately M&G (LSE:MNG) — whose forward dividend yield is an enormous 7.7% — doesn’t come anywhere near the category of ‘dividend trap’.

Since it was spun out of Prudential in 2019, annual payouts at the financial services giant have grown consistently. This also means dividend yields have remained far ahead of the broader FTSE 100‘s long-term average of 3%-4%.

Profits at M&G remain at risk as the UK economy struggles. This is because revenues from the savings accounts, retirement services and asset management services it provides can fall when consumers feel the pinch.

Yet I teel such disappointment shouldn’t impact the firm’s dividends. A Solvency II ratio of 223% gives it significant financial firepower to keep its progressive dividend policy in business.

I’m expecting dividends at M&G to keep rising steadily over the longer term too, driven by demographic changes and their positive impact on financial services demand.

A heavyweight dividend grower

A successful dividend strategy doesn’t just involve targeting high-yield dividend shares, of course. It’s also important to consider investments that deliver a steadily growing passive income over time.

The Scottish American Investment Company (LSE:SAIN) is a top investment trust to consider. That’s even though its forward dividend yield is a more modest 3%.

Its aim “is to grow the dividend at a faster rate than inflation by increasing capital and growing income,” a strategy that helps protect investor’s wealth from the eroding impact of inflation. And the trust has made a good job of it, as the chart below shows. The last time it cut shareholder payouts was in 1938.

Scottish American’s robustness reflects the wide spectrum of companies it holds shares in. The trust — which has been run by Baillie Gifford since 2003 — has holdings in 62 global stocks. Among its largest holdings are Microsoft, Deutsche Börse, Taiwan Semiconductor Manufacturing Company and Coca-Cola.

This broad sector allocation provides strength across the economic cycle, and over the long term the potential for robust payout growth as the portfolio’s earnings ignite. Roughly 20.6% of the trust’s stocks operate in defensive industries. Meanwhile, around 33.1% and 46.3% is locked up in cyclical and defensive shares, respectively.

Encouragingly, the fund isn’t just dedicated to generating passive income from equities either. Right now 11.8% is invested in property, cash and bonds, a policy that provides stability across the economic cycle.

Like any equity-based fund, Scottish American’s high weighting of shares leaves it exposed to volatility on global stock markets. But on balance, I think its highly diversified portfolio still makes it a top passive income provider to consider.

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In stark contrast, the plodding FTSE 100 has risen by around 17%. Even when adding in the generous dividends from many Footsie stocks, it doesn’t hold a candle to the US indexes.

Unfortunately, the FTSE 100 lacks the giant tech companies that dominate the digital world we rely on daily (smartphones, search engines, social media and more).

That’s not to say the FTSE 100 has no world-class giants. It does. AstraZeneca is one and recently became the first UK-listed firm to reach a £200bn market cap.

Yet it’s sobering to think that a $3trn+ Nvidia (or Apple or Microsoft) can move up or down by the equivalent of an AstraZeneca in an afternoon.

The bears are starting to growl

However, these valuations are alarming a growing number of market watchers. One is economist Harry Dent. He’s called this period “the second tech bubble” (after the first one around 2000) and the “bubble of all bubbles“.

In a recent interview with Fox Business, Dent said: “I think we’re going to see the S&P go down 86% from the top, and the Nasdaq 92%. A hero stock like Nvidia, as good as it is, and it is a great company, [goes] down 98%. Boy, this is over.”

He predicted this will happen in 2025.

History says this

Now, I’m going to stick my neck out and say I don’t see Nvidia’s market cap collapsing 98% to just $61bn (half its forecast revenue for its current financial year). If it did, then I’d be buying Nvidia shares hand over fist.

At some point though, the market will crash again. But nobody can say for sure when that will happen.

The important thing to remember is that the UK and US stock markets have a 100% success rate of recovery. Not only that, but history shows they’ve then marched on to new highs, regardless of how severe the downturn was.

High-quality stocks have a habit of recovering.

SAINTS

One FTSE 250 investment trust that’s survived many crashes, as well as two World Wars, is The Scottish American Investment Company (LSE: SAIN).

Established in 1873, SAINTS (as it’s known) aims to increase income above inflation by investing in growing companies that pay dividends. The portfolio also derives income from bonds and property.

Top stock holdings include Novo Nordisk and Microsoft, which are benefitting from the respective mega-trends of weight-loss drugs and artificial intelligence.

Regrettably, SAINTS’ share price hasn’t matched the global market in recent years. It hasn’t held Nvidia due to its minimal dividend. Yet Nvidia alone contributed about 25% of the S&P 500’s gains in the first half of 2024!

Top 10 holdings (as of 31 July)

While there’s a risk this underperformance could continue, surely Nvidia’s meteoric rise can’t last forever. As market gains become more evenly distributed in the coming years, SAINTS’ performance should improve.

Meanwhile, the trust recently increased the dividend for the 50th straight year. The forward yield is only 2.8%, but I expect the payout to grow for many more years (that’s not guaranteed though).

I’d buy its shares if I didn’t already hold them.

The post Experts keep warning about a stock market crash. Here’s what history says about it appeared first on The Twelfth Magpie.

The Edinburgh-based investment management firm has a reputation for delivering strong returns. Lately though, it has been in the news after the Hay Festival dropped its sponsorship.

This was due to celebrity figures pulling out of the literary event and accusing the asset manager of investing billions in fossil fuels and firms with alleged links to the Israeli defence sector.

In response, the company said: “The suggestion that Baillie Gifford is a large investor in the Occupied Palestinian Territories is seriously misleading.”

Just as bizarre to my mind is the notion that Baillie Gifford is a major oil investor. It’s more famous for backing Tesla, many years before it was popular to do so.

The solar and electric vehicle pioneer has arguably done more than almost any other firm to move the world towards more sustainable forms of energy.

Anyway, here’s one Baillie Gifford investment trust that I’d buy today and hold long term.

Growth and income

The Scottish American Investment Company (LSE: SAIN) is a FTSE 250 member with a truly amazing track record of growing its dividend. It has now raised its payout for 50 straight years!

Founded in 1873, its objective is to deliver real dividend growth by increasing capital and income. Real dividend growth means above the rate of inflation, which it has achieved long term.

Now, as we can see above, the dividend yield isn’t that eye-catching. Based on the current share price, it’s just 2.75%. When I can bag 7%-10% yields in the FTSE 100, that doesn’t seem very appealing.

However, it targets firms with the potential to grow both their share prices and dividends for many years. And it only invests in those whose earnings and cash flows are likely to grow ahead of inflation.

Risk to consider

The downside to this approach is that there can be periods of underperformance when a small number of non-dividend-paying stocks drive the market forward.

This has happened recently with Nvidia, whose dividend is negligible and therefore not part of the portfolio. Partly because of this, the trust underperformed its benchmark (the FTSE All-World Index) last year.

If this happens again, investors might question the strategy and sell the shares.

Two massive global trends

Despite this risk, I’m bullish due to the quality and durability of the trust’s portfolio, which also contains a smattering of bonds, property and infrastructure assets that pay income.

I like that Novo Nordisk and Microsoft are among its top holdings. This pair are at the forefront of two of the largest trends I see unfolding over the next decade: weight-loss drugs and artificial intelligence (AI).

The number of adults living with obesity is expected to rise from 800m in 2020 to 1.53bn by 2035. So this is a truly gigantic addressable market opportunity for weight-loss treatments like Novo Nordisk’s Wegovy.

Meanwhile, we can’t go 24 hours nowadays without hearing about AI. Nvidia’s CEO Jensen Huang has just pronounced that a new AI “industrial revolution” has begun.

As a leader in cloud computing and major investor in ChatGPT parent OpenAI, Microsoft looks incredibly well-placed to benefit from this.

The post 1 top Baillie Gifford investment trust I’d buy for my ISA and hold for decades appeared first on The Twelfth Magpie.

Here, I’ll consider two FTSE 250 trusts that look like smart buys for my portfolio right now.

Scottish American Investment Company

First up, we have Scottish American Investment Company (LSE: SAIN). This is run by Baillie Gifford and aims to provide both income and capital growth.

Launched in 1873, Saints (as it’s known) currently has 62 shares in its portfolio, as well as bonds and property. The emphasis is on steady earnings growth and dependability.

The dividend yield is fairly low at 2.8%. However, over the last 10 years, the dividend’s increased at a rate of 3.3% a year, above the rate of inflation (2.9% a year).

The top two holdings are Novo Nordisk, which is profiting handsomely from its obesity and diabetes drugs Wegovy and Ozempic, and Microsoft, the part-owner of ChatGPT parent OpenAI.

These are world-class companies with strong balance sheets, so I’d expect both to pay rising dividends for a long time.

Now, one issue here is the trust’s share price returns have lagged the FTSE All-World Index (its benchmark) for a number of years. Property hasn’t kept pace with equities while Saints hasn’t owned the likes of Amazon, Alphabet and Tesla. None pay dividends.

Further underperformance can’t be ruled out. That said, the £1bn trust has raised its dividend for 50 consecutive years and hasn’t cut it since the Second World War. Meanwhile, the shares are trading at a 10.1% discount.

Vietnam Enterprise Investments

Next is Vietnam Enterprise Investments (LSE: VEIL). Managed by Dragon Capital Management, this £1.4bn trust is more of a high-risk, high-reward investment as it’s focused entirely on long-term opportunities in Vietnam.

If anything goes wrong with its political system or economy, the shares could get punished.

Nevertheless, I’m optimistic about the country’s future. Foreign investment’s flooding in as companies relocate manufacturing away from China to Vietnam.

According to Statista, the nation’s gross domestic product (GDP) amounted to around $406bn in 2022, and is expected to increase to $657bn by 2028.

The demographics are also favourable, with a large, skilled labour force supported by a young and growing population. And the thriving economy is creating an expanding consumer base.

Vietnam Enterprise’s share price is up 37% over the last five years, but is down 22% since late 2021.

The top holdings aren’t well known, but that’s the point. I’d be investing to get exposure to economic growth via this portfolio.

Top 5 holdings (as of 14 March)

One gripe I have here is the 1.9% ongoing charge, which is quite high. However, the shares are trading at a 17.3% discount to NAV, so I think this one still looks very attractive.

Foolish takeaway

Finally, NAV discounts (or premiums) simply reflect prevailing market sentiment and investor demand. And this has been improving lately, meaning these sizeable discounts might not last for too much longer.

Therefore, I plan to top up my Saints holding and invest in Vietnam Enterprise with spare cash in April.

The post 2 top FTSE 250 investment trusts trading at attractive discounts! appeared first on The Twelfth Magpie.

Here, I’m going to highlight three ‘Dividend Hero’ investment trusts that investors may want to consider for 2024 and beyond. These are trusts that have increased their dividends every year for at least 20 consecutive years.

Alliance Trust

First up is Alliance Trust (LSE: ATST).

This trust is unique. That’s because its investment manager, Willis Towers Watson, has appointed 10 different professional investors (all with different styles) to pick stocks for the portfolio.

Thanks to this approach, investors get highly-focused stock picking. They also benefit from increased diversification.

I really like the portfolio here. In the top 20 holdings, there are plenty of big names such as Alphabet and Amazon.

However, there are also some more under-the-radar businesses such as Latin American e-commerce powerhouse MercadoLibre and Dutch semiconductor equipment company ASML.

It’s worth noting that this trust does have a large weighting to North America, which adds some risk.

I’m comfortable with this exposure, however, as the US is home to many of the world’s most dominant businesses today.

The yield here is about 2.5%, while ongoing charges are 0.61%.

Scottish American Investment Company

Next, we have Scottish American Investment Company (LSE: SAIN).

What I like about this trust – which is designed to be a core investment for private investors seeking income – is that it’s very diversified. Not only does it offer exposure to a broad range of equity markets (US, Europe, Asia, Australia, etc.) but it also provides some exposure to other asset classes such as bonds and property.

Within the equity component, the trust owns a lot of high-quality businesses. For example, the top 10 holdings include diabetes drug powerhouse Novo Nordisk, tech giant Microsoft, and consumer staples champion PepsiCo – three world-class businesses.

I’ll point out that returns here in recent years have been a little below those of the product’s benchmark due to the trust’s focus on income. We can’t rule out further underperformance going forward.

I think it could play a role in a diversified portfolio, however.

The yield is about 2.7%, while ongoing charges are 0.59%.

Scottish Mortgage

Finally, I want to highlight Scottish Mortgage Investment Trust (LSE: SMT).

This trust has been a bit of a dog in recent years.

That’s because it has a ‘disruptive growth’ focus, and a lot of stocks in this area of the market have been slammed as interest rates have risen.

I think it may have bottomed though.

Recently, the Scottish Mortgage share price has stabilised. And with interest rates likely to be cut in 2024, the prospects for a lot of its holdings look attractive.

One holding in particular that’s worth highlighting here is SpaceX – the privately-owned space company founded by Tesla CEO Elon Musk. It has huge potential. Recently, it was valued at $175bn. That’s more than any FTSE 100 company is worth.

Now, Scottish Mortgage is a higher-risk trust. Many of its holdings are volatile.

For those seeking long-term growth, however, I think it’s worth considering as we head towards 2024.

The yield is about 0.5%, while the ongoing charge is 0.34%.

The post 3 ‘Dividend Hero’ investment trusts to consider for 2024 appeared first on The Twelfth Magpie.

Datadog

What it does: Datadog provides an observability platform to manage and monitor the flow of data between cloud-based applications.

By Zaven Boyrazian. Datadog (NASDAQ:DDOG) is a software-as-a-service enterprise that enables its customers to monitor their cloud-based applications. The system can be connected to over 600 industry-standard technologies like Salesforce and AWS, enabling customers to control and observe the flow of data throughout their entire pipeline from a single platform.

Apart from identifying bottlenecks to improve efficiency, it serves as a robust cyber-security and regulatory compliance tool that’s used by over 25,500 companies worldwide. And that includes the London Stock Exchange itself.

The application performance monitoring sector is not short on competition. A recent report by Gartner revealed 19 businesses operating in this space. And while Datadog is considered a leader, fierce competition from the likes of Dynatrace and New Relic could impede future growth.

Nevertheless, given the group’s impressive track record and cash-generating business model, I’m confident that Datadog could be a multi-bagger for my portfolio in the long run.

Zaven Boyrazian owns shares in Datadog.

Primary Health Properties

What it does: Primary Health Properties leases healthcare buildings in the UK and Ireland. The majority of its rent comes from the NHS.

By Stephen Wright. Shares in Primary Health Properties (LSE:PHP) have been falling recently. And the lower the share price goes, the better I like it. 

Rising interest rates have been weighing on the market value of the company’s assets, which is why the stock is down 19% over the last 12 months.

Exactly when this will recover, I don’t know – probably when the Bank of England starts to lower interest rates. But I’m not bothered by this, since my investment in the business isn’t based on the value of its assets.

Instead, I’m interested in the cash flows the company generates. And management announced an extra £3.1m in income during the third quarter, with more to come by 2024. 

With its rent roll funded mostly by the NHS, there’s a risk that a change in government could bring uncertainty for the business. I think the 7% dividend yield justifies the risk of buying the stock here, though.

Stephen Wright owns shares in Primary Health Properties.

Revolve Group

What it does: Revolve Group is an online fashion retailer that specialises in selling high-end clothing and accessories.

By Muhammad Cheema. Revolve Group (NYSE:RVLV) shares have had a pretty rough couple of years.

They peaked in November 2021 at $86.01 apiece, but have since fallen by 85.4% to $12.53 at the time of writing.

This is because its revenue and profit have declined slightly due to tough global economic conditions. This poses a short-term risk to carrying its shares.

However, I’m a long-term investor.

Between 2017 and 2022, its revenue grew from $400m to $1.1bn. As the economy stabilises, I believe it will return to this level of growth.

Furthermore, I believe its use of artificial intelligence (AI) will continue to give it an edge over competitors.

It collects data analytics on its customers purchasing decisions for other brands listed on its site. This allows it to emulate successful brands based on that analysis.

With a current price-to-sales (P/S) ratio of 0.9, its stock are too cheap for me to ignore, and I’ve recently bought more.

Muhammad Cheema owns shares in Revolve Group.

Rightmove

What it does: Rightmove operates the UK’s largest property search portal. Through its website and app, users can search for properties to buy or rent.  

By Edward Sheldon, CFA. Rightmove (LSE: RMV) shares recently tanked after it came to light that rival OnTheMarket is being acquired by American online real estate powerhouse CoStar Group. I took the opportunity to buy more of the stock for my portfolio.

Rightmove is an exceptional company, to my mind. Not only does it have a strong brand and a very high market share (around 85% of the UK property search market), but it also has an excellent track record when it comes to revenue growth and profitability (it’s one of the most profitable companies in the FTSE 100 index).

Now, after the recent share price fall, Rightmove shares were trading on a forward-looking price-to-earnings (P/E) ratio of about 18. That just seemed too cheap to me given the company’s high-quality attributes, so I bought more.

It’s worth pointing out that the acquisition of OnTheMarket does add a bit more risk to the investment case. I think Rightmove is likely to remain the number one player in the UK property search market, however, due to the strength of its brand.

Edward Sheldon owns shares in Rightmove

Safestore

What it does: Safestore is the UK’s largest self-storage unit provider, with 131 stores nationwide. 

By Charlie Keough. Despite over a 2% rise in the past month (at the time of writing), shares in Safestore (LSE: SAFE) have fallen by over 20% in 2023. And with that, I decided to top up my position.  

There are a few reasons I’m attracted to the stock. First up, it looks cheap, with a price-to-earnings ratio of below 6. This is more than half of the FTSE 250 average. 

What’s more, the stock also has a dividend yield of over 4%. In the last decade, its dividend has increased by a whopping 400%. 

The business has posted strong growth in recent years. With it asserting its position as a leader in the UK, it’s now turned to European expansion as it continues to grow.  

The debt on its books could be a slight concern. Aggressive interest rate hikes and the impact this will have on property prices could also impact the firm’s operations. 

However, with plans for expansion, a low valuation, and a solid yield, I decided to buy more of the stock. 

Charlie Keough owns shares in Safestore.  

Scottish American Investment Company

What it does: Scottish American Investment Company is a FTSE 250 investment trust that aims to grow capital and the dividend faster than inflation.

By Ben McPoland. I’ve recently added to my holding in Scottish American Investment Company (LSE: SAIN). Or SAINTS, as the 150-year-old trust is commonly known as.  

My conviction in the management team’s stock-picking has grown stronger. Why? Well, the top two holdings are Microsoft and Novo Nordisk. Both companies are firing on all cylinders right now.

Excitement around AI has pushed up the share price of Microsoft (part-owner of OpenAI, the maker of ChatGPT) by 48% this year. Meanwhile, Novo Nordisk announced that Q3 sales of its weight-loss drug Wegovy rose more than eightfold year on year to nearly $900m.

Incredibly, SAINTS hasn’t cut its dividend since 1938! And the payout is soon expected to increase for the 49th successive year.

Granted, the yield today is fairly modest at 3%, which might mean the shares get overlooked for more eye-catching yields. But I’m happy to aim for sustainable, long-term dividend growth over yield size here.

Finally, the shares are trading at a 9% discount to the trust’s underlying assets. That’s pretty rare, historically speaking.

Ben McPoland owns shares of Scottish American Investment Company. 

Zotefoams

What it does: Zotefoams is a leading manufacturer of specialist foams, such as those used in Nike running shoes and in airline seats.

By Roland Head. I recently bought some Zotefoams (LSE: ZTF) shares, after the firm appeared in a search I made for reasonably priced growth stocks.

Current trading seems healthy to me, and management says the company is on track to hit City earnings forecasts for 2023. Zotefoams has also just expanded its exclusive deal with Nike, which could support further growth.

Looking further ahead, there’s some possibility that the company’s new ReZorce recyclable packaging material – used in drinks cartons — could become a big driver of earnings.

My main concern is probably that if the global economy slows, Zotefoams could see weaker demand from some of its top customers.

One other factor worth considering is that longtime chief executive David Stirling has just announced his retirement. Mr Stirling has been in charge since 2000.

However, the balance of risk and reward looks attractive to me at the moment. I think Zotefoams could perform well from current levels.

Roland Head owns shares in Zotefoams.

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However, I believe some Dividend Aristocrats are more likely than others to keep churning out passive income. Here are two I’d buy today if I didn’t already hold them.

150 years of income and growth

First we have Scottish American Investment Company (LSE: SAIN). This is a FTSE 250 investment trust that celebrated its 150th anniversary this year. Incredibly, it hasn’t cut its dividend since 1938!

The trust operates a diverse global portfolio of stocks (and some bonds). Its aim is to find resilient companies that can grow their earnings and dividends healthily over the very long term.

That means it isn’t so much focused on high dividend yields. Indeed, the stock only carries a 2.9% yield itself.

However, this philosophy has served it incredibly well, allowing the managers to identify the likes of Microsoft, PepsiCo and Watsco years ago.

The trust has also long highlighted the potential of top holding Novo Nordisk‘s weight-loss medication to turbocharge the company’s earnings and dividend.

This has been proved correct, as Novo Nordisk revealed in its most recent quarter that sales of its Wegovy weight-loss drug had risen more than 700% year on year.

One risk is that these stocks have increased so much that they’re now quite pricey. Novo Nordisk shares, for example, currently trade on a P/E ratio of 42. Any pullback could put pressure on the trust’s own share price.

However, in terms of the dividend, I reckon it’s safe. Investment trusts are allowed to retain as much as 15% of their revenue, which means they can use cash reserves to maintain consistent payouts even during challenging times.

Monster yield

If a starting dividend yield of 2.9% doesn’t sound that exciting, then I’ll mention insurance and pensions firm Legal & General (LSE: LGEN). This FTSE 100 stock is sporting an enormous 8.8% yield.

Normally I’d be a bit wary of any dividend yield approaching double-digits. It can sometimes be a warning sign that the yield is unsustainable.

However, in this case, I just think the stock is incredibly undervalued.

Why do I say this?

Well, despite a challenging backdrop, the firm is still on track to achieve its target of generating between £8bn and £9bn in capital by 2024. And its balance sheet remains strong, with a Solvency II ratio of 230% in the first-half of 2023, up from 212% in H1 2022.

A solvency ratio indicates whether a company’s cash flow is sufficient to meet its long-term liabilities. So it’s a way of measuring an insurance firm’s financial health. And L&G’s appears to be tip-top.

Of course, this high yield has so far failed to attract large numbers of bargain hunters. Therefore, there’s a risk that the shares might continue to be ignored for a while longer.

However, as with the previous stock, I’m reassured by L&G’s terrific long-term dividend record. In 2000, the payout was 4.32p per share. Last year, it was 19.37p per share.

For 2024, the stock is on a forecast dividend yield of 9.6%. If sustained, that’s enough to treble the value of an investment inside 12 years.

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Here are two of those stocks that are listed on the FTSE 250.

A high street staple

First up is Greggs (LSE: GRG), a new addition to my ISA. The bakery chain needs no introduction really, so I’ll just go straight into why I bought some shares.

Some pundits have been worried about “peak Greggs“, a time when growth slows due to the UK being fully saturated with the firm’s shops.

However, the company has displayed an impressive ability to just keep growing. Its bakeries are popping up everywhere people are on the move, notably airports, train stations, and petrol stations. And I can now get its food delivered to me on the Uber Eats app as well as Just Eat (I’m tempted, right now).

Plus, unlike many high street retailers, Greggs has managed to shrug off the cost-of-living crisis. It has been taking market share as people search out reasonably priced food.

International growth could be on the cards again, though that opens up risks of failure and higher costs.

Long term, I think franchising will become a bigger slice of the pie. That’s because this model — straight out of the McDonald’s playbook — gives it an opportunity to grow at a lower capital cost.

Income again and again

Next, I topped up my holding in Scottish American Investment Company (LSE: SAIN), or SAINTS as it’s often referred to. There are a few reasons why I like this 150-year-old investment trust.

First, SAINTS is a Dividend Hero, which means that it has has consistently increased its dividend for 20 or more years in a row. Indeed, it hasn’t cut its dividend since 1938, just before the Second World War!

Also, I like the structure of investment trusts. They’re able to retain 15% of the income they receive each year and have the flexibility to use that to boost dividends in tougher years. That’s why the trust was able to raise its dividend even during the financial crisis and Covid pandemic.

Lastly, it invests globally and focuses on sustainable dividend growth rather than high yield. So we have a top-notch portfolio of stocks that can contribute to long-term share price growth too.

AI and weight loss drugs

Top holdings include Novo Nordisk and Microsoft. Both companies have been firing on all cylinders lately, which highlights the managers’ high-quality stock selection.

Novo Nordisk, the 100-year-old Danish pharmaceutical giant, is seeing tremendous growth due to its weight loss drugs Ozempic and Wegovy.

Meanwhile, Microsoft is benefiting from surging cloud computing demand, partly fueled by the growth of generative AI tools like ChatGPT from OpenAI (which it owns nearly half of).

As mentioned, the trust’s objective is long-term dividend growth over yield size. So the modest 3.1% yield might not appeal to everyone, and the share price could take a knock if large-cap US stocks fall out of favour.

Lastly, I’ll highlight that the shares are currently trading at an 11% discount to the trust’s net asset value (NAV). Historically speaking, this level of NAV discount is pretty rare, which means there could be a bargain on offer right now.

The post 2 top FTSE 250 stocks I’ve been buying in my Stocks and Shares ISA appeared first on The Twelfth Magpie.

10% yield

First up, I’m heading eastwards for dividends with Henderson Far East Income (LSE: HFEL). As the name suggests, this investment trust focuses on income stocks from across the Asia-Pacific region.

The headline attraction here is the 10% dividend yield, which is fully covered by income. This mouth-watering yield has trended upwards over the last five years as the share price has dropped by around 33%.

The portfolio managers do tend to lean towards a value approach. This means the fund doesn’t have much in the way of technology stocks at the moment, which is unfortunate as many of these have risen on the back of market enthusiasm for AI.

If growth-oriented stocks continue to outperform this year, then the share price may struggle. However, I think the overall trust should offer defensive qualities if market conditions weaken.

Top holdings include Bank of Communications, one of the largest banks in mainland China, and Taiwan Semiconductor Manufacturing.

To my mind, Asia offers superior long-term earnings growth potential. And this trust gives my portfolio exposure to this rapidly-growing region, while diversifying my income in the process.

FTSE 250 winner

Commonly known as SAINTS, the Scottish American Investment Company (LSE: SAIN) is one of the oldest investment trusts in the UK. In fact, it’s been around for 150 years old, having been set up in 1873 for Victorian private investors.

Now, the yield is far less impressive on the surface at 2.62%. But this FTSE 250 trust, run by Baillie Gifford since 2004, hasn’t cut its dividend in 80 years. Therefore, I’m hoping for sustainable long-term dividend growth here.

Plus, there’s also the prospect for capital appreciation, as the share price has risen 110% in the last decade.

Since 2004, on a total return basis (income and capital growth), its shareholders have seen their initial investment grow by 4.6 times. This compares to the average higher-yielding UK income fund at just 2.8 times.

The trust’s objective is to grow the dividend at a faster rate than inflation. Last year, the dividend was hiked 9% in line with this policy. But with inflation remaining stubbornly high, this could become more difficult to achieve.

However, one thing I like is that beyond its staple of global stocks, the trust also invests in bonds, property and other asset types. This diversifies its income streams.

Portfolio top 10 holdings

FTSE 100 struggler

Finally, I’m looking to add Persimmon to my portfolio for the first time. The stock is not far from a 10-year low after rising mortgage rates and inflation impacted the housebuilder’s earnings.

The general outlook for the UK property market remains bleak.

Yet I can’t help feeling interest rate hikes will ease off and the housing market will recover in time.

Plus, Persimmon is a very well-run business, has no debt, and is trading on a price-to-book ratio of around one.

Meanwhile, there’s a 5.5% dividend yield on offer while I wait for a potential turnaround.

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