The recent market volatility has shaken investor confidence. However, long-term investors shouldn’t focus on the market’s near-term declines. Instead, investors with a multi-decade investment horizon should use this opportunity to snap up shares of high-quality companies that have fallen on hard times.
With that in mind, here are two FTSE 250 dividend growth stocks that look attractive after big falls.
Dart Group (LSE: DTG) is one of the FTSE 250’s top growth stocks. Or it was before the COVID-19 outbreak slammed travel stocks. Shares in the owner of the Jet2 holiday brand have plunged on concerns about the impact the epidemic will have on sales.
So far, Dart hasn’t published any guidance on this matter. But other companies have. These forecasts suggest Dart’s losses could reach into the tens of millions of pounds, although that’s just a rough forecast at this stage.
Still, investors should look past Dart’s current issues and focus on its long-run potential. Jet2 is a trusted and successful holiday brand. The vast majority of the holidaymakers that book with the business return to use the service again.
That’s one of the reasons why the company has achieved earnings growth averaging 30% per year for the past six years. The dividend to shareholders has grown at a similar rate. Therefore, while the business might have to deal with the travel disruption for the next few weeks or months, customers are highly likely to return.
More importantly, Dart has the resources to weather the storm. Its last trading update showed the company had a net cash balance of £455m.
Therefore, now could be a great time to snap up a share in this dividend growth champion at a discounted price. It’s currently dealing at a price-to-earnings (P/E) multiple of just 10.7, which looks cheap compared to the firm’s historical earnings growth rate.
Another FTSE 250 dividend growth stock that has recently appeared on my radar is high street baker Greggs (LSE: GRG). Unfortunately, after a solid start to the year, February’s stormy weather hit the business hard.
According to Greggs’ most recent trading update, sales increased at a double-digit percentage year-on-year in January. Then growth collapsed in February. The flooding of a bakery in Cardiff, which forced the closure of 40 stores, didn’t help matters.
Again, looking past these short-term headwinds, the group’s long-term outlook is exciting. The company has achieved earnings growth of 22% per annum since 2013. There’s no reason why this cannot continue going forward.
The dividend has grown at a compound annual rate of 13% during this time frame. After recent declines, the stocks dividend yield has spiked to 2.4%.
Meanwhile, shares in Greggs are dealing at a P/E of 24.7. That might seem expensive, but it could be a price worth paying for this dividend growth champion as it continues to dominate the UK high street.
The post I think it’s time to be greedy with these 2 FTSE 250 dividend growth stocks appeared first on The Motley Fool UK.
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Rupert Hargreaves 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