8.6% dividend yields! 2 FTSE 250 dividend stocks to buy
The increasingly uncertain outlook for the global economy isn’t draining my appetite for UK shares. Why should it? There are still many London-quoted companies that could thrive, even if the economic recovery crashes. Here are two rock-solid FTSE 250 dividend stocks I’m thinking of buying today.
I don’t just buy UK income shares based on yields over the short-to-medium term. All the stocks I invest in are ones I think will provide terrific returns over a number of years. I buy companies I’d be comfortable to own for a decade, perhaps even longer.
This is why I’m seriously thinking of adding Greencoat UK Wind (LSE: UKW) to my Stocks and Shares ISA. It’s hard not to look at a newspaper and read something on global warming and how lawmakers are accelerating their green energy strategies. This is something that bodes well for Greencoat, a firm which (as the name suggests) invests in wind farms across the country.
As we’ve seen in recent months, wind power is notoriously unreliable, a point that has helped to push natural gas prices in the UK to recent peaks. The business of keeping the turbines spinning is also massively expensive and huge (and often unexpected) costs can be common.
But despite these threats to Greencoat’s profits, it’s still a very appealing dividend stock to own. Electricity is one of those critical commodities so demand for the stock’s services is always guaranteed. And wind turbines are, broadly speaking, a very-effective means of generating the stuff.
I’d buy Greencoat UK today because of its huge 5.2% and 5.5% dividend yields for 2021 and 2022 respectively. And I’d aim to hold it for years to come.
8.6% dividend yields
I also think Direct Line Insurance Group (LSE: DLG) is one of the best FTSE 250 stocks to buy for big dividends. Recent share price weakness has sent the company’s already-impressive dividend yields through the roof. For 2021 and 2022, it now sports yields of 8.6% and 8.3% respectively.
Direct Line is a cash machine, pure and simple. And, like Greencoat UK, its ultra-defensive operations mean it is a reliable profits generator during good times and bad too. As a consequence it has a rich track record of rewarding shareholders with market-beating shareholder payouts.
Spending on general insurance (and especially car insurance) tends to remain unchanged, even if economic conditions significantly worsen. So Direct Line could be a particularly wise buy as economic indicators in the UK worsen.
However, I’m concerned by the intense competition the insurer faces in its key markets. This limits the wriggle room Direct Line has to raise premiums and thus boost profits. Though thanks to the immense brand power of brands like Direct Line and Churchill has meant that it still comes out slugging.
I think those 8% dividend yields — as well as a low forward P/E ratio of 11 times — make it a great dip buy right now.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.