With so many stock prices still low after the 2020 crash, I reckon I’m seeing some great dividend yields. Today I’m looking at three FTSE 250 dividend shares that I’d buy for my Stocks & Shares ISA today.
First up is Direct Line (LSE: DLG), the insurance company well known through its TV ads. I’ve always liked the insurance business for its dividend potential, though it does come with a caution. The sector can be cyclical, and dependent on economic ups and downs.Â
Like its competitors, Direct Line slashed its 2019 dividend as a result of the pandemic. But it bounced back to provide a yield of 6.9% for 2020. Forecasts suggest a similar 22p per share for the current year. But a 9% share price decline in 2021 has pushed the prospective yield up to 7.5%.
The DLG share price is down 1.2% over past 12 months overall, but with a volatile path. And it’s still down 13% over two years. With our economic outlook possibly a little fragile, there’s certainly some downside risk here. But, as with my approach to all insurance shares, I see Direct Line as a good income investment for the very long term.
But which is best?
There are quite a few attractive FTSE 250 dividend shares out there, but my eye seems to keep falling on finance-related stocks. My second pick is price comparison site Moneysupermarket.com (LSE: MONY). The company had a tough 2020, but it kept its dividend going to provide a 4.5% yield.
That payment was only poorly covered by earnings, after a hefty 2020 earnings drop, and that does raise a risk. If earnings don’t get back to pre-pandemic levels, I think the dividend could come under pressure. And then, of course, there’s the extensive competition in the price comparison market. Hence the old joke question, how do you pick the best price comparison website?
But on the upside, Moneysupermarket has a decent track record of earnings and dividend growth. It’s a company with little need for big capital expenditure, and has a business with healthy margins and cash flow. If earnings return to pre-pandemic levels, we’ll be looking at a price-to-earnings of around 14. I think that’s good value.
Third FTSE 250 dividend share
Finally, I’m going for another in the money business. It’s Plus500 (LSE: PLUS), the online trading platform. As we’ve seen over the past year, stock markets can be very volatile. As an investor, that teaches me two things. One is to keep away from short-term trading. That’s because every time I buy or sell, I pay a charge, and they quickly add up.
The other lesson is that every time someone buys or sells, Plus500 collects a fee, and they quickly add up. The company has been attracting growing numbers of customers, and trading volumes appear to be consistently high.
Analysts are predicting a dividend yield of 8% for the current year, and it looks like it should be well covered by earnings. There’s a risk that when stock markets settle (which I expect they will), the number of traders looking for short-term profits will drop. In fact, I think that’s likely. But I still see Plus500 as one of the best value FTSE 250 dividend shares I could buy right now.