Forget fine art! I’d invest in this FTSE 250 dividend stock instead

Cineworld’s share price has dropped over the past year. Is now the time to buy?

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People often say that an investment in fine art is a good idea. Not only does it bring joy to own a painting that you love, but years down the line it could earn you a fortune.

We sometimes hear stories of lucky people who picked up a masterpiece for a pittance, only for it to be worth seven or eight figures years down the line.

Wouldn’t investing in art make sense then? For two reasons, I’ve always struggled to make sense of it.

Firstly, I believe that buying a painting as an investment is a massive gamble. For every Picasso or Hockney, there are hundreds of artists whose pieces have diminished in value over the years.

By comparison, in the last five years, the FTSE 250 has grown by approximately 36%. Past results are not guaranteed to repeat themselves, but I’d fancy my chances much more with this index, instead of investing in fine art.

When you add dividends to the equation, then I believe it is a no-brainer: no artwork can return a regular sum to an investor. But when a share’s dividends are reinvested and compound interest starts, that’s when your returns get interesting.

I think this FTSE 250 share could be a great place to start.

Cineworld

The Cineworld (LSE: CINE) share price has dropped by 14% in the past year. This makes the price-to-earnings ratio an attractive 10. The dividend-yield is currently 6.8%.

Investors have concerns over Cineworld’s rising debt pile. But fellow Fool Rupert Hargreaves notes that the business’s management remains confident that it can reduce its debt and maintain its dividend.

On 16 December, Cineworld announced the acquisition of Canada’s Cineplex. The company has almost 1,700 screens and is the top cinema operator in Canada, with 75% of the market share. The acquisition makes Cineworld the leading cinema operator in North America by number of screens.

I think this could end up being a shrewd move by Cineworld. Its largest shareholder — at a holding of approximately 28% — thinks so too, with the accompanying announcement stating it fully supports the transaction.

Cineworld has noted that the acquisition was debt-financed. The company has stated that it has a “diligent focus on debt reduction.” The deal was valued at $2.1bn, including debt.

The Cineplex acquisition is the latest in a series of consolidation moves in the market, following the rise of streaming giants like Netflix.

Am I concerned that streaming services will impact Cineworld? Not really. I think both services provide something different to the customer. I see the market for Netflix to be more targeted towards the consumption of box-sets and the occasional movie. It is very difficult to replicate the cinema experience at home.

Buy art if you enjoy it, but I believe that viewing it as an investment is a big mistake. For retirement, I’d much rather bulk out a stocks and shares ISA with FTSE 250 shares.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

T Sligo has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix. 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.

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