For all the attention Bitcoin has been getting in recent days, investors should remember that it doesn’t pay out income. This is similar to gold, another asset that has performed strongly in 2020. For a growth investor, this won’t be too much of an issue. But. I prefer to balance my portfolio with income-paying assets as well. To this end, there are several FTSE 250 stocks with an attractive dividend yield that I think deserve a closer look.
I’ll make sure that any stock I buy is within my Stocks and Shares ISA. This allows me to accumulate the income within the tax wrapper. This income isn’t liable to tax as dividend income. Bitcoin and other cryptocurrencies cannot be held in such a wrapper, and so incur capital gains tax on the profits when you sell them. So what stocks interest me today?
Generating power and dividends
Contour Global (LSE:GLO) is listed on the FTSE 250. It’s a utility firm at the core, and operates power generation plants around the world. Around 40% of the generation comes from renewable sources, with the remaining 60% coming from stores such as coal and natural gas. As such, the business has not been overly impacted by Covid-19. This was specifically noted in the H1 results, with operating profit up 13%.
Contour had good liquidity of $633m at mid-year, enabling it to pay out a healthy dividend. The firm currently has a dividend yield of 6.02%. This is even more impressive when you consider the share price is only slightly down on where it started the year. So this yield is being generated from the size of the payout, instead of being inflated by a falling share price.
As an income investor, I like Contour because of the “safe” industry it operates in, and how so far it has been insulated from the pandemic. Unlike other companies, this gives me confidence that the dividend won’t be cut any time soon.
Another generous dividend yield
The Contour dividend yield is attractive, yet a fellow FTSE 250 constituent has a current yield of 6.37%. This business is Plus500 (LSE: PLUS), the online retail trading platform. I’ve written before about similar businesses, such as IG Group. The sector has grown massively in recent years, but has seen a boom in 2020 as trading becomes more accessible to the retail arena. With volatility in the stock market, many new investors have been drawn into this space.
Over 46,000 new accounts were opened in Q3, leading to customer revenue of $240m for Plus500. This number would be an all-time record had it not been for the previous quarter’s figures. Regardless, the year-on-year growth in revenue stands at 124%, a staggering statistic.
In all of this, some of the profit has been returned to shareholders via dividend income. The FTSE 250 company has a high yield, mentioned above. The share price is up over 80% this year. In a similar way to Contour, this shows that the healthy dividend yield is from an enhanced payout. When referencing this back to Bitcoin, Plus500 does seem to offer me the best of both worlds. I pick up the income I desire, but also benefit from a capital gain (sheltered within my ISA) if I sell the stock!
The post Forget Bitcoin! I’d buy these 2 FTSE 250 stocks with dividend yields above 6% for my ISA appeared first on The Motley Fool UK.
jonathansmith1 has no position in any of the shares mentioned. 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 2020