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It's easy to ignore FTSE 250 as a source of benefits. But some companies in the mid-cap index offer high yields, and forecasts show that they will rise significantly.
Let's start with a look abrdn (LSE: ABDN) paid a dividend of 10.8% for the week.
That's partly due to a weak share price, down 54% over the past five years. The Q3 update on October 24 didn't help, hitting six stocks. Yes, with a 10% drop per day, at least.
Vendor forecasts may need to be revised. But for now, at least, they seem strong, and show the stability of the shares until at least 2026. At that time, the cash dividend will not be covered by the income.
Getting out
In that Q3 update, the company reported a 2% increase in assets under management. That's nice, but polite. And we heard about outflows across Asia and emerging markets.
The company told us that “The transformation program is always on the way“. But until the revolution is truly transformative, uncertainty like the one we see today remains a serious threat.
Can abrdn continue to pay dividends while removing those pesky exits and getting earnings up again? If possible, that 10.8% yield and dealer price of 159p (up 35%) might make it a consideration.
Dividend forecasts can be wrong, however, and the price is misguided.
Mortgage repayments
OSB group (LSE: OSB) is a mortgage specialist, which may not sound like a good business to be in when interest rates are falling.
The stock price has been having a tough time in 2024, down 20% year to date. But there is a huge 9% dividend yield on the cards.
Furthermore, forecasts show that it will rise to 9.3% by 2026, based on the current share price. And they show a lot of coverage with benefits as well – 2.4 times this year, and 2.8 times in 2026.
And the company is buying back its own shares, so the board must think they're worth a fortune now. With a forward price-to-earnings (P/E) ratio of just 4.6, the board may be right.
A temporary decline
But the interim report on August 15 gave the shares a kick, dropping 19% of their value in one day.
It appears to be under pressure from interest rates and housing competition. And Bank of England rates certainly have a way to go yet.
So what do I think? Well, we're looking at a stock with a market cap of just £1.4bn here. That's a far cry from the £34bn figure Lloyds Banking Groupthe UK's largest mortgage lender.
And small banks and financial services companies tend to be worse off in any squeeze.
Still, that low valuation and high dividend yield could make OSB one worth considering for bold investors.
Many assignments
There are many additional high dividend yields among the FTSE 250 stocks, often with strong earnings coverage and strong forecasts.
The real lesson for me is that we should forget what index the stock is in and focus on the business itself.
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