Is it time to consider this FTSE 250 12.4%-yielding dividend share?
The FTSE 250 is full of dividend shares. In fact, as I write in early September, the index is yielding 3.38%. Perhaps surprisingly, this is a tiny bit higher than the 3.36% offered by the FTSE 100.
Some of this differential can be explained by share buybacks. So far in 2025, instead of returning cash directly to shareholders, members of the Footsie have spent £39bn buying their own shares.
Even so, those looking to boost their incomes — with cash in their hands — could consider taking a closer look at some of the highest-yielding FTSE 250 stocks.
A rising yield
One example is Ithaca Energy (LSE:ITH), the North Sea oil and gas producer, which has had a turbulent week.
Its shares fell heavily after its two of its largest shareholders — DKL Energy and Eni UK — announced on 2 September that they had sold 3% of the group to institutional investors at a 10% discount to the prevailing share price.
During the following four days, the share price tanked more than 18%.
For new investors, this means the stockâs yield has increased further. Already one of the best on the index, itâs now offering a return of 12.4%.
However, in its short existence (the groupâs only been listed since November 2022) its dividend has proven to be erratic. This is typical of the energy sector where earnings can be volatile.
| Year | Dividends per share (cents) |
|---|---|
| 2023 | 39.63 |
| 2024 | 34.04 |
| 2025 (to 5 September) | 10.10 |
Helping to fix the nation’s finances
Another major problem for the group is that profits made in the North Sea are subject to an effective corporation tax rate of 78%. A windfall tax means the sectorâs being heavily squeezed by the government.
The impact of this can be seen from Ithacaâs results for the six months ended 30 June. During this period, the group reported a profit before tax of $513m but its tax charge was an eye-watering $731m. This is a tax rate of 143%.
However, some of the charge includes deferred tax ($292m). This isnât payable until a later date — possibly many years into the future — even though itâs shown to reduce this yearâs post-tax earnings.
Fortunately for income hunters, the group remains cash generative. Although dividends are a distribution of a companyâs profit to shareholders, they are paid using cash. So those wanting to understand how secure the groupâs dividend is should take a look at its cash-generating potential. During the first six months of 2025, its operating cash flow was $1bn. This helped reduce its net debt by $214m.
And a series of acquisitions means the groupâs production was 133% higher compared to the same period in 2024. Ithaca plans to return $500m to shareholders in respect of its 2025 financial year. And due to its âexcellent operational performanceâ it recently announced that itâs going to bring forward the timing of its next two dividend payments.
The industry is lobbying hard to persuade the government to introduce an alternative to the energy profits levy. We will know in November whether the Chancellor is sympathetic. Until then, even with oil and gas prices at relatively low levels, Ithaca Energy appears to be doing well. It could be one for income investors to consider.
The post Is it time to consider this FTSE 250 12.4%-yielding dividend share? appeared first on The Motley Fool UK.
Should you invest £1,000 in Ithaca Energy right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ithaca Energy made the list?
More reading
- As the FTSE 100 storms ahead, Iâm paying attention to Warren Buffett
- Prediction: in 12 months Barclays, Lloyds and NatWest shares could turn £10,000 intoâ¦
- Mining or oil? Tech or tobacco? 3 things to consider when choosing shares for a SIPP
- 2 undervalued FTSE shares to consider in September
- Could the FTSE 100 hit another all-time high this September?
James Beard 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.
