While the FTSE 100 is the main UK stock market index, I feel investors shouldn’t ignore the FTSE 250. This index, which contains the 250 largest London Stock Exchange-listed companies outside the FTSE 100, is home to some great companies.
Today, I’m going to highlight two FTSE 250 dividend stocks I like the look of right now. Both have strong growth prospects and the potential to provide investors with a growing stream of dividends.
FTSE 250 online shopping play
One of my favourite stocks in the FTSE 250 is Tritax Big Box (LSE: BBOX). It’s a real estate investment company that owns a portfolio of modern, sophisticated storage warehouses that are let out to retailers. Its tenants include some of the biggest names in retail such as Amazon, Tesco, and TK Maxx.
The reason I’m bullish here is that the company looks very well placed to benefit from the online shopping boom. Online retailers such as Amazon need warehouses to store their goods. Tritax, with its best-in-class portfolio of strategically-located, modern warehouses offers a solution. With online shopping sales as a proportion of total UK retail sales set to increase from 27.5% this year to 32.1% by 2024, Tritax will have tailwinds behind it in the years ahead.
Tritax has a lot of dividend appeal. For the full year, analysts expect a payout of 6.3p per share. That equates to a prospective yield of 3.9% at the current share price. Management recently said that it will continue to monitor the dividend position for FY2020 with the aim of progressively increasing the dividend when it has better visibility.
BBOX shares currently trade on a forward-looking P/E ratio of about 23. I think that’s a reasonable valuation for this FTSE 250 e-commerce stock. I’d buy today.
Another FTSE 250 dividend stock I’d buy today is Softcat (LSE: SCT). It’s a leading IT company that helps companies with their technology infrastructure. Its services, which include solutions related to cloud adoption, cybersecurity, networking, data analytics, and remote work, are in high demand right now.
Softcat’s financial performance has been solid this year. Just recently, the group advised that for the first quarter ended 31 October, it delivered year-on-year growth in revenue, gross profit, and operating profit. Cash generation has remained in line with normal trends. It added that it had positive momentum heading into the second quarter.
The dividend yield here isn’t huge. Last year’s payout equates to a yield of about 2%. However, recent dividend growth has been very impressive. While other FTSE 100 companies have slashed their payouts this year, Softcat has increased its distribution. It also paid a special dividend. Meanwhile, over the last three years, Softcat has lifted its payout by 84%. If the company continues to hike its payout going forward, investors could be looking at a very healthy payout in the future.
Softcat shares currently trade on a forward-looking P/E ratio of about 30. So, the stock isn’t cheap. I’m not put off by that valuation though. Given the FTSE 250 company’s strong track record and future growth prospects, I think it deserves a premium valuation.
Edward Sheldon owns shares in Softcat, Tritax Big Box, and Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Softcat, Tesco, and Tritax Big Box REIT and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.