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These FTSE 250 dividend stocks have 5.7%-plus yields! Should you buy them for your ISA?

Royston Wild
Various denominations of notes in a pile

Amid a sea of dividend cuts, Dixons Carphone (LSE: DC) could be considered by some as a safe haven.

The company made no mention of any upcoming payout cuts when it updated the market last week. Instead it will make a decision on whether to pay a full-year dividend for the current year (to April 2020) when “a clearer view on the scale and duration of the impact of COVID-19” becomes apparent in the summer.

But be prepared, I say. Difficult times for the UK economy could see sales for its big-ticket items fall off a cliff. The FTSE 250 retailer saw electrical sales surge 23% in the prior three weeks to the release. This reflected quarantined Britons loading up on laptops, TVs, and the like. This is undoubtedly a flash in the pan, though, and I expect revenues to settle back to their depressing norms before long, with weakness in its mobile operations in particular set to dominate.

I don’t care about Dixons Carphone’s giant 8% forward dividend yield. I for one am avoiding this share at all costs.

More big yields!

It’s not all bad news, though. Plus500 (LSE: PLUS) is one share I’d be very happy to invest my hard-earned investment pennies into today.

This FTSE 250 dividend stock is the biggest online trading platform provider for contracts for difference (or CFDs) in Europe. And it is doing a roaring trade at the moment as the coronavirus crisis creates mass volatility on financial markets.

Plus 500 said in mid-March that it had witnessed “a significantly increased level of customer trading activity alongside strong momentum across all financial and operational KPIs.” Heightened levels of market volatility means that revenue from customer income has been “very strong” it added, while it has also enjoyed gains from customer trading performance.

It said that uncertainty over how long current volatility will last – allied with the impact of regulatory changes in Australia – means that the full-year outcome is difficult to predict. What it did say, however, was that “we expect revenue and profitability for the full year to be substantially ahead of current consensus expectations.”

A better FTSE 250 dividend stock

It’s no big surprise, then, that Plus500’s share price has actually risen while broader equity markets have remained under pressure. It recently touched one-year highs above £11 per share, in fact. It’s fair to expect the company to continue marching higher, too, as spreading infection rates, and a likely rise in government lockdown measures in response, likely keep investor nerves on edge.

What’s more, Plus500’s share price is low enough to support more meaty gains. A forward price-to-earnings (P/E) multiple of 8.1 times sits well inside bargain-benchmark territory of 10 times or above. This reading’s particularly attractive when you consider the strong possibility that brokers will be frantically upgrading their earnings forecasts when first-quarter financials come out on 7 April.

As I said earlier, Plus500 is a particularly attractive stock choice for income investors. This is due to its mighty 5.7% dividend yield. There are some long-term regulatory issues that the trading giant still has to hurdle. At recent prices, though, I reckon it could be considered too good to pass up on. And particularly as payout cuts continue across the rest of the market.

The post These FTSE 250 dividend stocks have 5.7%-plus yields! Should you buy them for your ISA? appeared first on The Motley Fool UK.

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Royston Wild 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