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When it comes to hunting big dividend yields, the FTSE 100 gets more attention than the FTSE 250. That should come as no surprise. London’s leading index holds significantly chunkier dividends than most of the world’s other leading stock exchanges. But the UK’s smaller index also has plenty of stocks to choose from for those looking to top up their portfolios.
As I write, the FTSE 250 boasts 46 stocks with at least a 6% yield, 28 stocks with a 7% yield, and 12 stocks with a a 9% yield. These might not all be household names, but they might be worth a look. Let’s meet three of the biggest payers.
Three picks
The first big yielder is investment group Aberdeen (recently abandoning its former moniker of ‘abrdn’). The firm is one of the biggest companies on the index, having dropped down from the FTSE 100 not so long ago. The stock boasts a 7.3% dividend yield and has remained above the 6% mark for most of the last decade.
A second FTSE 250 dividend stock to look at is Harbour Energy. The oil and gas firm has operations across the globe but is centred around the North Sea. Its 8.43% dividend yield is a good sight higher than its FTSE 100 counterparts of Shell and BP. The yield has been above 7% since the 2022 merger that created it.
The third stock that caught my eye is Foresight Environmental Infrastructure (LSE: FGEN). At a £400m market cap, the investment trust is one of the smallest companies on the FTSE 250. Its dividend yield, by contrast, is the highest at a whopping 12.21%. Looking at the last 10 years of yields, a figure of 6%-7% is closer to a long-term average however.
A bargain?
It’s the final one that intrigues me most out of the three. The gargantuan dividend is attractive of course at over three times the FTSE 100 average. It’s well covered by last year’s earnings and there are no plans for a rebase or cut on that huge yield.
The reason the yield has rocketed is because of a falling share price. At 64p a share, the shares are going at a 52% discount compared to a previous high. The reason for the drop is largely down to interest rates which aren’t fallng as fast as expected. The green energy investments it deals in are cheaper when rates and therefore borrowing is lower.
The most striking detail is a mammoth discount on ‘Net Asset Value’ or NAV. The NAV is like the worth of all its assets. If a firm’s share price is cheaper than the equivalent of its assets (per share) then it has a discount on NAV.
This isn’t uncommon in investment funds where it’s not easy to judge the value of assets. But what is strange is the huge 40% discount on NAV that Foresight Environmental Infrastructure has at the moment. That could be a sign that there is great value here. I’d say it’s one to think about.
