The FTSE 250 can be a very good index for finding UK shares with high yields and the potential to grow. Here are three I like, but at the moment, one really stands out to me.
Investing in renewables
I like the look of is Renewables Infrastructure Group (LSE: TRIG). It’s an investment trust dedicated to assets generating electricity from renewable sources. With increasingly ambitious net zero targets, I think there are long-term tailwinds behind companies that invest in renewables.
The key, however, is to have a management team that can avoid buying assets at inflated prices. Overpaying is a big risk now that oil majors, for example, are starting to develop green assets.
Established in 2013, the Renewables Infrastructure Group has a headstart on other companies. Its team is also much more specialised and has more experience.
Its assets are mostly in the UK and Northern Europe/Germany, these are all politically stable places, which will make it easier for the company to operate there, as opposed to a frontier region.
With a dividend yield of 5.2%, this is a high-yielding FTSE 250 share that I’ll consider adding to my own portfolio.
2 FTSE 250 shares from the same industry
IG Group Holdings (LSE: IGG) is a spread betting and stockbroking company. Volatile markets last year helped it perform strongly, but the flip side of that is it makes growing against those tough comparisons harder this year.
Despite that, I think there are reasons for optimism. The company is pursuing an active growth strategy. It is investing more in its existing business and acquiring companies overseas. That should help grow the spread better’s revenues and profits.
The shares have a yield of 5%. That puts them well above average versus many other FTSE 250 shares. I think I’d potentially add the shares both for price growth and for income. That’s especially the case as the stock is quite cheap on a P/E of just 13.
But I’d avoid buying the shares if there was increased speculation about a tightening of regulations, which is always a possibility and one of the main concerns with investing in this particular company.
The stronger one?
CMC Markets (LSE: CMCX) is a competitor to IG Group. Overall, I think it might be slightly stronger. It’s owner-managed, has more international diversification already (offering stockbroking in Australia, for example) and has its own technology. It sells this on a ‘white label’ basis to other financial companies.
Its strong trading from 2020 shows no signs of abating so far, despite less market volatility this year. A CMC Markets update earlier this year saw it lifting its full-year guidance following a “strong” fourth-quarter performance.
And in an update for the period from 1 January to 24 March, the company said it has continued to perform “very strongly“.
It also offers good value with a P/E of 14, broadly in line with competitor IG Group.
What would put me off would be if spend per customer dropped, or overall client numbers dropped. These figures are usually included in the updates and there’s a risk flatter markets may lead to clients dropping out.
With a dividend yield of 4.23%, I consider it a high-yielding share. Of the three FTSE 250 shares, CMC Markets is the one I’d most likely add to my portfolio. I like its diversification and its strong management.
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Andy Ross owns no share 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.
