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Have £1,000 to invest in the FTSE 250? Here are 2 dividend stocks I’d buy in an ISA today

Peter Stephens
A house being constructed in the countryside

While the FTSE 250 may not be an obvious place to invest for income-seeking investors, the index currently has a wide range of enticing dividend stocks with growth potential.

Of course, in some cases they may face an uncertain future. This could mean that they display heightened share price volatility versus their larger peers.

But with these two mid-cap shares having high yields, significant growth catalysts and fair valuations, now could be a good time to buy them for the long term.

Centamin

Gold miner Centamin (LSE: CEY) released an encouraging production update last week. The company is on track to meet its production guidance for the current year, which could lead to improving investor sentiment.

While the gold price may exhibit further volatility in the coming months, it could provide a store of wealth for investors who are cautious about the prospects for the world economy. Since the global trade war is ramping up and interest rates in the US could fall before they rise, the gold price may enjoy a tailwind over the medium term as investors increasingly seek defensive assets.

With Centamin currently having a dividend yield of around 5.5%, the stock could have increasing income appeal. Its dividend is covered 1.3 times by profit, while it has no debt, a strong cash position and the potential to deliver robust production over the long run. As such, for investors who are seeking to diversify their portfolios and gain exposure to the precious metals sector, it could prove to be a worthwhile purchase in the long run.

Bovis

Also offering a mix of dividend and growth potential is FTSE 250-listed housebuilder Bovis (LSE: BVS). The company is making progress in improving the quality of its homes, with customer feedback being increasingly positive according to recent updates. This could help to rebuild the company’s reputation after the customer redress issues of recent years.

Of course, the housebuilding sector could experience a period of uncertainty. While demand for new homes is robust at the present time, a change in the Help to Buy scheme and interest rate rises may lead to increasing difficulty in getting on to the property ladder for first-time buyers.

However, with Bovis currently trading on a price-to-earnings (P/E) ratio of 9.4, it seems to offer a wide margin of safety relative to many of its index peers. Furthermore, its dividend yield of 9.8% for the current year suggests that it may offer a relatively impressive income return as its financial performance improves.

As such, for investors who are able to overcome short-term risks from an uncertain period for the UK economy, Bovis may offer an enticing long-term income outlook. Its current management team seems to have the right strategy to deliver growth, while potentially avoiding the customer service issues experienced in previous years.

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Peter Stephens owns shares of Centamin. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2019