The UK housing market is a complex beast. On one side, the demand for homes is outstripping supply. On the other hand, due to economic issues and interest rates rising, buying a home is arguably harder than ever. Many have therefore turned to renting. Could professional landlord Grainger be a shrewd addition to my holdings? Let’s take a closer look.

Grainger share price in recent months

As a quick reminder, Grainger is one of the largest residential landlords in the UK. It currently rents close to 10,000 homes to over 23,000 people across the country. It designs, constructs, and rents out homes up and down the country. Its current portfolio is worth approximately £3bn with future projects in the pipeline.

So what’s been happening with Grainger shares recently? Well, as I write, they’re trading for 279p. At this time last year, the stock was trading for 295p, which is a 5% drop over a 12-month period. Many FTSE stocks have seen their share prices drop recently due to macroeconomic issues.

FTSE stocks have risks

Recent macroeconomic headwinds have placed pressure on many businesses and this includes landlords. The falling economy has led to a weakened employment market. With people struggling to secure work, there is every chance they may struggle to pay rent. This would affect Grainger’s performance and shareholder returns.

Next, the soaring cost of raw materials and the supply chain crisis could affect Grainger’s growth plans. Construction has been impacted heavily by the issues noted above. There is a real chance Grainger’s future projects could see costs spiral out of control. This could impact its balance sheet, investment viability, and returns.

The bull case and my verdict

So to the positives. Let’s start by looking at Grainger’s performance. I do understand that past performance is not a guarantee of the future. I can see it has a consistent record of revenue and profit generation. Furthermore, when performance dipped in 2020 due the pandemic, it managed to bounce back in 2021 and surpass pre-pandemic levels. FY results for 2022 are due close to the end of this year and I will look out for these.

With sustained positive performance, Grainger is able to return money to shareholders in the form of dividend payments. These dividends boost my passive income stream. Its current dividend yield stands at 2%, which is in line with the FTSE 250 average.

Grainger shares currently look decent value for money too, on a price-to-earnings ratio of just 13. Finally, the current economic picture and housing market lead me to believe that a business like Grainger, with its profile, presence, and experience could prosper.

Right now I would add Grainger shares to my holdings. I do expect the shares to start climbing up sooner rather than later. Full-year results are due in the months ahead and if it manages to surpass 2021 results, I would expect the share price and dividend payments to increase too.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Premier Foods

What it does: Premier Foods manufactures a variety of branded and supermarket own-brand packaged food products.

By Stephen Wright. My top British stock for investors to buy in July is Premier Foods (LSE:PFD). I’ve been interested in this stock for a long time, but I think it might finally have reached a stage where I’d like to buy shares for my portfolio.

If you’ve ever heard that your branded custard and your supermarket-brand custard are from the same factory, this is true. And Premier Foods is the company that owns that factory.

I think that demand for this company’s products should remain stable, even in a recession. And the stock trades at a price-to-earnings (P/E) ratio of just under 13, which I think is reasonable.

To my mind, Premier Foods had always had too much debt and that’s stopped me from buying shares. However, with management having substantially reduced debt over the past few years, I’m looking at buying shares in July.

Stephen Wright does not own shares in Premier Foods.

Grainger 

What it does: Grainger is the largest residential landlord on the London Stock Exchange with a portfolio of around 10,000 homes. 

By Royston Wild. In theory, residential landlords like Grainger (LSE: GRI) could suffer some turbulence as the economy sinks. As the employment market weakens, the chances of their tenants missing rent payments increases. 

Recent data showing Britons drastically cutting food spending indicates the extreme financial pressures people are facing today. 

Past events are not always an accurate indication of what’s to come. But encouragingly, history shows us that spending on accommodation by and large tends to remain stable during all points of the economic cycle. As a result, I think Grainger is an ideal stock for me to buy in July as the cost-of-living crisis worsens. 

In fact, this is a property stock I’d buy to own for the long haul. The UK’s shortage of available rented homes looks set to drag on, meaning Grainger should continue to enjoy strong rental income growth.

Finally, I like the steps the business is taking to rapidly expand to supercharge profits growth. For instance, in late May it spent £128m to acquire another build-to-rent development in Bristol. 

Royston Wild does not own shares in Grainger. 

Associated British Foods

What it does: ABF owns fashion retailer Primark and a range of food businesses, including Kingsmill, Twinings and sugar producer AB Sugar.

By Roland Head. Family-controlled Associated British Foods (LSE: ABF) has been through a tough period. But I think I am now seeing a rare buying opportunity for this stock.

Primark was hit hard by the pandemic because it doesn’t sell online. But the company’s value offering is chiming with consumers battling the cost-of-living crisis. Primark sales rose by 81% to £1.7bn during the 12 weeks to 28 May, compared to the same period last year.

Interestingly, Primark is now trialling a click-and-collect service. This could lead to a full online retail offer.

The main risks I can see relate to ABF’s food and agriculture businesses. With costs rising, I can imagine that profit margins could be squeezed by big buyers such as supermarkets.

However, ABF shares currently trade on around 12 times forecast earnings. I’ve rarely seen them so cheap. I think this could be a great long-term buying opportunity for my portfolio.

Roland Head does not own shares in Associated British Foods.

Reckitt

What it does: Reckitt is a consumer goods company that is focused on health, hygiene, and nutrition.

By Edward Sheldon, CFA. Given the amount of economic uncertainty we’re facing right now, I think it’s a good idea to buy more defensive dividend stocks for my portfolio. And one stock that fits the bill here is Reckitt (LSE: RKT).

Reckitt is certainly defensive in nature. Even in a recession, people are still going to buy its health products (e.g. Strepsils lozenges) if they fall ill. Meanwhile, it also has a nice dividend. At present, the prospective yield on offer is just under 3%.

Another attraction of Reckitt is that it’s currently benefiting from the infant formula shortage in the US. With a major rival recalling its products due to contamination fears, the company has been able to capture market share. This has boosted revenues on the nutrition side of the business.

Now, this stock does have an above-average valuation, which adds some risk. However, all things considered, I think it’s a smart buy for my portfolio in the current environment.

Edward Sheldon owns shares in Reckitt.

AstraZeneca

What it does: AstraZeneca is one of the largest biotech firms in the world focused on tackling cancer, respiratory, and cardiovascular diseases.

By  Zaven Boyrazian. The biotech sector is fraught with enormous development challenges and financing risks. Yet, for the groups that succeed, humongous growth can be uncovered. That certainly seems to be the case for AstraZeneca (LSE:AZN) at the moment.

Despite being a giant “blue-chip” player in the space, shares have climbed by almost 30% year-to-date. The company has been delivering a slew of positive clinical trial results for several of its ongoing projects. But most notably is its phase 3 breast cancer treatment, Enhertu, which achieved a 49% reduction in disease progression versus traditional chemotherapy.

The drug is now being recommended for European approval by the Committee for Medicinal Products for Human Use (CHMP). And, if granted by regulators, it could untap a multi-billion-dollar market opportunity from just one of its products in the pipeline.

Pairing this exciting prospect with a diverse product pipeline and plenty of resources at its disposal makes AstraZeneca a business I’m considering for my portfolio today.

Zaven Boyrazian does not own shares in AstraZeneca.

Fresnillo

What it does: Fresnillo is a miner and producer of precious metals, including gold and silver, and operates in Mexico.

By Andrew Woods. In 2021, Fresnillo (LSE:FRES) reported that profit before tax had increased by about 10.9%, while revenue grew by 11.2% over the same period. Much of this has been due to higher metal prices over the past couple of years.

While silver production remained flat last year, gold production fell by 2.4%. This decline may be offset in future by the opening of two new plants at Juanicipio and Pyrites. Both of these could bolster production in the years ahead.

In a wider sense, investors may flock to gold and silver to avoid inflationary risk. With inflation set to rise to 10% in 2022, this trend could mean that the value of Fresnillo’s produce increases over time.

There are risks, though. The company could begin to feel the pinch from higher energy costs. In addition, there is the challenge of workers’ potential wage inflation. Further regulations may also impact on operations, as could any pandemic resurgence.  

Andrew Woods does not own shares in Fresnillo.

B&M European Value Retail SA

What it does: B&M is a discount retailer selling branded products to over four million customers a week.

By Paul Summers: Its share price has been struggling lately but I reckon discount retailer B&M European Value Retail SA (LSE: BME) is worth a closer look. With inflation likely to continue climbing over the summer, the company is well placed to benefit from an extended period of belt-tightening by UK consumers.

True, recent full-year results weren’t particularly well received. Revenue was down slightly on the previous year (but still way up compared to two years ago) and profit was flat. News that the CEO Simon Arora is to depart has also made investors nervous.

Still, I think a lot of bad news is now baked in. A P/E ratio of just over 10 at the time of writing looks reasonable. A 5% forecast dividend yield is chunky and looks very unlikely to be cut based on earnings expectations.

Paul Summers does not own shares in B&M European Value Retail SA

Rolls-Royce

What it does: Rolls-Royce is a manufacturer of engines for commercial aircrafts, business aviation and military transport, as well as developing onsite power and propulsion systems.

By Andrew Mackie: The recent woes of Rolls-Royce (LSE: RR) have been well documented, but I am starting to see real value at the level the share price is trading at.

What has sparked my interest was the recent civil aerospace investor day, which has led me to believe that there is light at the end of the tunnel.

Consistent investment over many years in its core markets of wide-body aircrafts and business aviation are starting to bear fruit. The business is now going through a period of less-intense new-product introductions, meaning that it will be able to capture a greater proportion of revenues through lucrative service contracts.

Another area that has seen explosive growth is in the passenger-to-freighter conversions. Rolls-Royce is primed to capitalise on this emerging trend. As supply chains have become increasingly constrained, companies have been looking for new ways to move their goods across the globe. The Trent 700 engines have a near complete monopoly in this space.

Exactly timing a likely recovery in the share price is impossible. But I am convinced that, long term, the trend will be higher.

Andrew Mackie does not own shares in Rolls-Royce.

British American Tobacco

What it does: British American Tobacco is a United Kingdom-based, multi-category consumer goods company that provides tobacco and nicotine products.

By Kevin Godbold. It’s hard for me to ignore the tempting numbers coming from British American Tobacco (LSE: BATS). With the share price near 3,560p, the forward-looking dividend yield for 2023 is just above 6.8%.

Annual dividend payments have been rising for several years. And they are backed by a robust flow of cash into the business. Meanwhile, elevating profits and a vibrant share buyback programme look set to drive earnings higher.

BATS is winning market share for its new products aimed at reducing some of the harmful effects of smoking. And losses have been reducing for the category. But the traditional smoking products are still a cash cow for the company despite a trend of declining worldwide volumes.

The industry faces intense regulatory scrutiny at times. And that could increase the risk for investors. But I’m holding the stock and believe it could do well in July and beyond.

Kevin Godbold owns shares in British American Tobacco.

Breedon

What it does: Breedon is the UK’s largest independent construction materials firm. It produces cement, aggregates, asphalt, and other construction materials.

By John Choong. With the government recently announcing its new ‘Help to Build’ scheme, there are a number of stocks that could benefit from the initiative. One of which is AIM-listed, Breedon (LSE: BREE). A new house typically uses more than a 100 tonnes of cement and aggregates combined, on average. Therefore, new builds from the scheme should bring a tailwind to Breedon’s top line.

Breedon has multiple streams of income. The firm builds other infrastructure as well, such as roads, of which it has a sizeable contract surfacing and highway maintenance business. Additionally, the S&P Global/CIPS UK Construction PMI (a measure of how well the construction sector is doing) is still posting strong figures of growth.

So, with a P/E ratio of 13 and a forward P/E of 10, the stock definitely seems reasonably priced. Analysts have also given the stock an average price target of £1.00. As such, Breedon shareholders could potentially grow their money by 60%.

John Choong does not own shares in Breedon.

Unilever

What it does: Unilever is a fast-moving consumer goods manufacturer that owns premium brands like Dove. 

By Christopher Ruane. It has been a challenging year for consumer goods maker Unilever (LSE:ULVR). The company behind premium brands like Domestos and Lynx has been battling with rampant cost inflation. That threatens to eat into profit margins.

I think that helps explain why the Unilever share price has fallen by 13% over the past year. Investors are worried that inflation could hurt profits. In the short term, I think that is true. But I am a long-term investor, and reckon the current share price is a buying opportunity for my portfolio.

The sort of pricing power premium brands give a company can help it offset the challenge of inflation. So though Unilever’s volumes slipped 1% in the first quarter compared to the prior year, it still managed to grow sales by 7.3%. I think this resilient business model makes it an attractive buy for my portfolio at its current price.

Christopher Ruane owns shares in Unilever.

Bringing the house down

I think getting exposure to the residential rentals market is a great investment idea. And I’d do this by buying shares in Grainger (LSE: GRI), the country’s largest private-sector landlord.

Rents are rocketing because of a chronic lack of available properties. It’s a theme that’s been exacerbated by rising buy-to-let costs that have prompted an exodus of landlords in recent years. I fully expect this shortfall to continue for several years at least too, as rental home supply will likely fail to keep up with demand growth.

According to the Deposit Protection Service, average rents rose to £849 in the first quarter. This was up 6.1% on an annualised basis. Tenant costs increased in all regions, with 10 of the 12 regions recording growth above 4%.

Rents set to keep soaring

The problem with investing in Grainger shares is that they aren’t cheap. Today, the company trades on a forward price-to-earnings (P/E) ratio of 35.4 times.

Any sort of premium valuation leaves a UK share in danger of a price correction if newsflow begins to sour. In the case of Grainger this could include rising costs or problems with meeting its construction targets.

However, it’s my opinion that Grainger merits a large earnings multiple. The outlook for the British rentals sector remains ultra-bright and is likely to remain so for some time. Analysts at Savills for example have predicted rents in the UK will rise almost 20% between now and 2026.

A top cybersecurity stock

I believe that buying some UK technology and IT services shares could be a good idea as the digital revolution clicks through the gears. One way I’d look to do this is by buying Kape Technologies (LSE: KAPE) for my stocks portfolio.

This particular company is an expert in the field of digital security and privacy. It makes antivirus software which battle cyber attacks, for example, and services which protect users’ anonymity when going online.

The cyber security market alone is tipped to grow strongly this decade. Analysts at Statista, for instance, think the industry will be worth $211.7bn by 2026. That’s up significantly from the $146.3bn it’s tipped to be worth this year.

Crusading Kape

The market opportunity for Kape Technologies is huge. But there’s no guarantee it will deliver monster profits growth in the years ahead. For example, the company is coming up against the might of industry heavyweights such as Norton and Microsoft.

Still, it’s my opinion that the size of the market opportunity — and the excellent progress Kape is making right now — makes the UK share a top stock to buy today. Kape saw revenues leap 20.7% (on a pro-forma basis) in 2021, blasting past even its own expectations.

Another top property stock

I bought Barratt Development and Taylor Wimpey shares to capitalise on soaring demand for newbuild properties. And I’m considering snapping up Grainger (LSE: GRI) shares to make money from the white-hot residential rentals market.

Average rents in Britain continue to soar as the country’s acute shortage of rented properties worsens. Rightmove now says that the average rent outside London has leapt to £1,088 a month. This is up 10.8% year-on-year and is the first annual jump above 10% on record.

It’s the country’s largest landlord in the private rental sector and is thriving in this landscape. Rental growth accelerated to 3.2% on a like-for-like basis in the four months to January. And occupancy of 97% in the period beat even its own expectations.

Expanding for growth

Grainger has plans to expand rapidly to exploit this fertile environment too. This year alone it plans to open four new assets comprising a total of 1,174 rental units.

My main concern for it are changes to rental regulations that could drive up costs. But all things considered I think the benefits of owning this UK share outweigh the risks.

Besides, in the current environment of high inflation I think it’s a particularly shrewd buy. This is because the rents property companies ask for tend to rise in line with broader inflation. As an investor, this provides me with much-needed protection from rampant inflation that threatens to worsen considerably.

Spectacular dividend growth

I also like it because of the possibility of rapid dividend growth. City analysts think the full-year payout for this year (to September) will leap 8.2% to 5.57p per share, from 5.15p last time out.

The number crunchers think the total dividend will rise to 6.25p per share in financial 2023 as well. This would represent a 12.2% year-on-year increase.

Annual rises vs yield

Now, yields at Grainger aren’t the biggest. For fiscal 2022 and 2023, these sit at 1.8% and 2.1% respectively. They sit below the broader forward average of 3.5% for UK shares.

 Still, the prospect of strong and sustained dividend growth long into the future still makes Grainger one of the best dividend stocks to own, in my opinion. I don’t expect Britain’s shortage of rental properties to be solved any time soon.

Researchers at Capital Economics suggest the UK needs to create 227,000 rental homes a year to meet soaring demand. It’s a figure which looks quite impossible, in my opinion. So I expect profits and dividends to continue rising strongly at Grainger for a long time.

Grainger’s profits are at risk from changing regulations related to the rentals market. However, I think the breakneck momentum of rent rises in Britain still makes it a stock that’s too good for me to miss. According to the Royal Institute of Chartered Surveyors (RICS) its members expect rents to grow 5% a year over the next half a decade.

What’s more, I like Grainger’s plans to capitalise on this fertile environment to maximum effect. Its property pipeline (which stood at 8,373 homes in September) should more than double its net rental income.

A UK share in great shape

Huge uncertainty hangs over the global economy as inflation soars, Covid-19 drags on and the tragic war in Ukraine continues. I think buying some UK healthcare shares is a good idea in this landscape. Spending on medical care is one of the last things we tend to cut back on when times get tough.

Private hospital operator Spire Healthcare (LSE: SPI) is one stock I’m considering buying today. This is because NHS waiting lists are rocketing and an increasing number of people paying for treatment as a result. Revenues at Spire leapt 20.3% year-on-year in 2021 (and jumped 12.8% on a two-year basis) as private patient numbers rose by record levels.

The problems in the NHS look set to worsen before they get better too, meaning that trading at Spire should remain robust. Analysis of NHS data by The Guardian newspaper shows that the number of British people waiting for cancer treatment now sits at all-time highs. I’d buy the business even though changing health policy could damage demand for its private care.

A FTSE 100 favourite

Regulations are getting tougher for gambling companies as the government addresses the problem of addiction. The results of a major review into UK gambling laws are due in the coming weeks. And this has the potential throw up some serious problems for operators like Entain (LSE: GVC).

However, I think the dangers of me owning this particular stock could be baked into its current share price. Today Entain trades on a forward price-to-earnings growth (PEG) ratio of 0.2. This is comfortably inside the threshold of 1 and below that suggests a stock could be undervalued.

I believe Entain — the owner of popular gaming brands like bwin, Ladbrokes and partypoker — could be a great UK share to buy as online gambling continues to take off. Indeed, annual online net gaming revenues at Entain soared a further 12% in 2021. This was the ninth successive year of double-digit growth at the FTSE 100 firm.

Grainger share price spikes after announcements

Grainger is the UK’s largest listed residential landlord. It designs, builds, develops, owns, and operates rental homes throughout the UK. As I write, Grainger has 9,109 rental homes with over 23,500 customers. It currently has a portfolio value of over £3bn and has over 8,000 new homes in its pipeline worth approximately £2bn.

Shares in Grainger are trading for 308p per share, as I write. After this morning’s announcements, the FTSE 250 incumbent’s stock has risen by 4% from 296p per share to current levels. This time last year shares were trading for 292p per share, which means it has remained consistent across a 12-month period.

Results and acquisitions

Grainger reported post-close full-year results for its financial year ended 30 September 2021 today. It simultaneously announced an acquisition to boost growth which should see earnings and investor sentiment rise if plans come to fruition.

Grainger’s trading report was impressive but said full financial details will be provided in the middle of November. The highlights that stood out to me from this snapshot were Grainger’s excellent lettings performance in H2 2021. It reported 95% occupancy, which is high for a rental business. It also raised £206m worth of new equity for growth plans. The FTSE 250 incumbent confirmed like-for-like rental growth continued throughout the year. I believe financials could be equally as impressive when provided next month and could boost the Grainger share price.

Grainger has exchanged contracts to acquire a 401-home build-to-rent development scheme in Southall for £141m. It confirmed proceeds from the recent equity it raised would pay towards this. I view this as a savvy move. Grainger already has an excellent West London portfolio and this development will be close to a new Crossrail station as well.

FTSE 250 stocks carry risks

Firstly, with the rise in buy to rents in the UK, there is a real threat that regulation and laws around this lucrative market could change. Any changes could see Grainger’s profits squeezed. Next, construction suffered due to the pandemic. Despite reopening, there is still a threat of the virus and further restrictions that could slow progress in any newer developments.

There are a few key things I like about Grainger. Revenue and profit have remained consistent over the past four years. Furthermore, its assets have grown and cash has increased, supplementing a healthy balance sheet. I don’t have any worries it could struggle financially. I understand past performance is not a guarantee of the future but I use it as a gauge nevertheless.

Grainger looks to acquire strategic developments to boost growth which is always exciting to see as a potential investor. Finally, the rental market in the UK is booming as many people struggle to buy their first and new homes. Grainger is well placed to capitalise on more renters with a vast array of properties throughout the UK.

I think Grainger is one of the most underrated stocks on the FTSE 250. I would happily add shares to my portfolio right now and keep them for a long time.

Extreme share price turbulence due to social, economic or political events is nothing new. Yet history shows us that UK share prices always roar back following such crises. This is why the average long-term investor enjoys a handsome (if not guaranteed) average annual return of 8%.

I’ve already invested in Keywords Studios in recent days. Here are three more of what I feel are some of the best stocks to buy too. Like other UK shares I own, if I had a lump sum to invest, I’d buy them with a view to holding them for at least a decade.

On Cloud 9

I believe that the rise of home-working in the wake of last year’s Covid-19 outbreak presents good investment opportunities. And I’d do this by investing in Iomart Group (LSE: IOM). This a UK share that offers cloud computing services through its network of data centres spanning Europe, North America and Asia-Pacific.

A new BBC survey reveals how companies like Iomart could be some of the best stocks to buy to ride the digital revolution. More than 80% of the firms that were surveyed said they would “embrace a mix of home and office working”, the broadcaster said. Employees of these firms would be “encouraged to work from home two to three days a week”, the BBC added. The 50 companies that were questioned employ a total of 1.1m people, a figure that illustrates the huge revenues potential for companies that make remote working possible.

Bear in mind though, Iomart has some very big industry rivals. This means that it faces significant pressures when it comes to both product price and quality. The cloud computing market is expanding rapidly, but this UK share isn’t totally without risk.

One of the best property stocks to buy?

I also believe that Grainger (LSE: GRI) could be another top UK share to buy right now. I certainly believe that the professional landlord is one of the best property stocks to buy as rents in Britain go from strength to strength.

A report by estate agency Savills suggests that average rents will rise 17% during the five years to 2025. It’s a prediction that reflects the expectation that tenant demand should continue outpacing property supply, exacerbated by the large number of buy-to-let landlords leaving the sector due to increasing red tape and higher tax charges.

It’s true that changes to the regulation of the rentals market could hit Grainger’s profits further down the line. But right now, I think it’s a great UK share to buy for the next decade.

Better than expected rental demand

Being a residential landlord is something that my friends tell me can be quite a headache. Yet Grainger does this at a very large level, having investment properties worth £1.7bn around the UK. 

Given the impact of the pandemic, I would have expected a negative impact both tangibly from lower rental demand and also intangibly from property valuation.

It’s no surprise to me that the Grainger share price was not a top stock to buy early in 2020. When the stock market crash hit, the share price fell from circa 338p to 229p, a fall of over 30%.

The 2020 results don’t actually cover over the full impact of the pandemic. The financial year runs September-to-September, meaning that the 2020 figures benefited from having a period of normality before the eye of the storm hit. Nevertheless, revenue did fall 4%, with the net valuation of rental property taking a large hit.

Rental income managed to grow versus 2019, something I put down to the 612 new rental homes launched. Ultimately, bottom line profit before tax fell by 16%.

A reopening stock to buy now?

The resilience in its rental income has led me to think that Grainger could perform even more strongly in more normal times than I initially thought. Periods of economic growth are usually associated with high demand for rental property. The bounce-back in the UK economy this summer should support higher occupancy rates for the business.

It also should help the valuation of the property portfolio to increase. As Grainger owns a sizeable amount of property, the higher valuation on the balance sheet for 2021 would be an added bonus.

I’m glad the stock is on my radar to buy now, but I will be waiting for the six-month interim results to come out next week before investing. I think this will be key to see how business has been through the last lockdown. In a trading update in February, rent collection stood at 98%, so signs are promising.

One risk to buying this stock now though is the negative impact of the surge in first-time buyers. The cut to stamp duty has seen a large amount of people get onto the property ladder over the past six months. More buyers mean less rental demand.

Yet barring any disasters in the results next week, I’ll be looking to add Grainger to my portfolio.

With that in mind, here are my favourite FTSE 250 stocks I’d buy right now. I think each of these businesses has a bright and improving outlook. I reckon they’ll continue to grow no matter what happens in the rest of the market. 

Looking past the stock market rally 

Investors have been buying stocks recently as the global vaccine rollout has inspired confidence that the global economy will return to growth later this year. 

Unfortunately, it’s impossible to say if this’ll be the case at this early stage. The global economy faces many risks at present. Anything could happen over the next few months, which would destabilise the recovery. 

Nevertheless, I believe buying high-quality firms is likely to be a successful strategy in the long run. Of course, nothing is ever guaranteed when it comes to investing. But, by focusing on companies with strong balance sheets and competitive advantages, I think I can swing the odds of success in my favour.

Two FTSE 250 businesses, in particular, tick these boxes.

Greggs and Grainger are two very different firms. One is a retail bakery, best known for its sausage rolls, and the other is a large residential landlord. Despite these differences, I think both businesses have strong balance sheets and, more importantly, strong competitive advantages in terms of their brand and scale. This doesn’t mean these stocks are without risks. Greggs’ sales have suffered significantly from rolling lockdowns.

This could continue if the virus remains a threat. Rising wages and ingredient costs may also put pressure on the FTSE 250 business. Meanwhile, Grainger is at risk from regulatory changes and rising interest rates, which could destabilise its business model. 

Still, I’d buy both of these businesses to capitalise on the stock market rally and take part in their future growth potential. 

FTSE 250 financial services

One way to play the UK economic recovery is to buy financial services stocks. One option is Virgin Money.  In my opinion, this challenger bank is one of the most exciting financial businesses in the country. It has the size and scale to compete with larger financial groups, and the Virgin brand is known the world over. 

Despite its opportunities, the company does face challenges. Low interest rates have become a persistent challenge for lenders over the past decade. It doesn’t look as if this is going to change anytime soon. What’s more, the lender has announced it will have to write off £726m of loans due to the pandemic. This figure could increase as the true impact of the crisis becomes known. 

Despite these risks, I’m incredibly excited about the company’s future. That’s why I’d buy the stock for my portfolio today. 

With that in mind, here are three FTSE 250 dividend stocks I’d buy with £3k today. 

FTSE 250 dividend stocks

Grainger (LSE: GRI) is one of the UK’s largest landlords. The company can use its size and scale to buy properties with funding at low rates. Economies of scale allow the firm to manage these properties without incurring high costs. 

As a result, the stock has become an income champion. Its payout has grown at a compound annual rate of 5.4% for the past decade, and that track record looks set to continue. The pandemic’s impact on the business has been minimal and its dividend is covered 2.6 times by earnings per share. That suggests to me the company could more than double the distribution without having to cut corners elsewhere. Meanwhile, the dividend is backed by income from rental properties. 

Therefore, while Grainger’s yield of around 2% might not be the highest on the market, I’d buy the company as part of a portfolio of FTSE 250 dividend stocks, thanks to the quality of the payout. 

Asset-backed

I’d buy 3I Infrastructure (LSE: 3IN) for similar reasons. This company’s primary business model is to invest in infrastructure and other assets that generate a sustainable return.

The overriding aim of management is to provide shareholders with a sustainable return of 8% per annum. Over the past 10 years, the company has met and exceeded this target producing a total return for investors of around 12% per annum. 

3I has produced this return through a combination of income and capital growth. The stock currently supports a dividend yield of around 3.3%. This payout has grown at a compound annual rate of around 6% for the past seven years.

The group also has a high level of dividend cover. The distribution is covered 2.4 times by earnings per share. Again, this suggests the distribution is secure and 3I has the potential to increase the payout further.

This is yet another FTSE 250 dividend stock that could produce investors with a steady income stream backed by real assets. 

Cash-rich

A company that’s benefited significantly from the volatility that’s dominated stock markets in 2020 is CMC (LSE: CMCX). This business makes money every time a customer places a trade on its platform. Therefore, high levels of trading translate into higher levels of income for the group. 

Over the past 12 months, activity on the group’s trading platforms has surged and, as a result, so have CMC’s profits. Rising profits have enabled the organisation to cement its position as one of the top FTSE 250 dividend stocks. It currently offers a dividend yield of around 5.8% and the distribution is covered nearly three times by earnings per share. 

Not only is the company’s dividend well covered by profits, but CMC’s balance sheet is also stuffed full of cash. The group has no debt and profit margins are more than 40%. I think this suggests the business will remain a dividend champion for many years to come