Aiming to turn £10k into £20k? Here are 3 FTSE 250 shares for investors to consider
The FTSE 250 doesn’t get as much attention as its older sibling, the FTSE 100 — but maybe it should. Over the past two decades, the mid-cap index has comfortably outperformed the UK’s blue-chip benchmark. It’s a diverse mix of companies that are typically further along than early-stage growth stocks, but still small enough to offer exciting growth potential.
Naturally, investing in mid-cap stocks comes with extra risk, as they can be more sensitive to economic headwinds than global giants. But for long-term investors willing to do the research, the index offers plenty of compelling opportunities.
Some shares could even turn a £10,000 investment into £20,000 — or more — over the next 10 years.
Here are three that I think are worth considering.
Primary Health Properties
Primary Health Properties (LSE: PHP) is a real estate investment trust (REIT) focused on modern, purpose-built healthcare facilities – many of which are leased long term to NHS tenants. That makes its income about as reliable as it gets in the REIT space.
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The dividend yield currently sits around 7%, and with compounding via reinvestment, a £10,000 investment could grow to roughly £22,000 over a decade. What’s more, dividends have grown consistently at an average of 3.5% annually, providing a nice cushion against inflation.
There are a few red flags, though. The shares look expensive with a price-to-earnings (P/E) ratio of 30, and the dividend payout ratio is worryingly high. If earnings falter, the dividend could be vulnerable. Still, its defensive sector and government-backed income streams are hard to ignore.
Spectris
Spectris (LSE: SXS) makes precision instrumentation and controls used in high-tech industrial settings. It’s a name that doesn’t often trend. But quietly, this FTSE 250 firm has been making long-term shareholders very happy. Over the past three decades, Spectris has delivered triple-digit gains each decade — and then some.
Despite its strong track record, it still trades at a price-to-earnings growth (PEG) ratio of just 0.26, suggesting it could be undervalued relative to its growth prospects. Operating margins are high, and return on equity sits close to 18%.
The dividend yield is modest, but payments have grown for 19 straight years and remain well covered by earnings. Risks include a slowdown in industrial demand or underperformance in key end markets. But for a steady growth stock with a quality track record, it’s one I’d keep an eye on.
OSB Group
OSB Group (LSE: OSB) is one of the UK’s best-kept secrets in financial services, combining growth with generous dividends. Over the past decade, the share price has climbed 90% and it currently yields 6%. If the same growth and yield held for the next 10 years (which isn’t guaranteed), it could turn £10k into £28,200.
However, the business is heavily exposed to the specialist mortgage market. If house prices tumble or bad debts spike, profits could take a hit. Its debt load is already quite high – almost double its equity – so a dip in profit could shift priorities away from dividends.
Importantly, the payout ratio is a manageable 43%, giving it plenty of headroom. That valuation also looks compelling: a P/E ratio of just 7.4 and a price-to-book (P/B) ratio below 1.
The post Aiming to turn £10k into £20k? Here are 3 FTSE 250 shares for investors to consider appeared first on The Motley Fool UK.
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Mark Hartley has positions in OSB Group and Primary Health Properties Plc. The Motley Fool UK has recommended Primary Health Properties Plc and Spectris Plc. 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.
