Here are two of the FTSE 250’s biggest dividend predictions

It’s easy to get the FTSE250 as a source of dividends. But some companies in the mid-cap index offer high returns, and forecasts show these will rise even higher.

Let’s start with a look at abrdn (LSE: ABDN), whose prediction dividend yield has risen to no less than 10.8%.

That’s partly due to the weak share price, which has fallen 54% over the past five years. A Q3 update on October 24 didn’t help, leaving the shares at six. Well, at least for a 10% drop on the day.

Broker forecasts may need to be updated. But for now, they seem solid and show the dividend will remain stable until at least 2026. During that time, however, the dividend money would not be covered by expected earnings.

Outflow

With that Q3 update, the company reported a 2% increase in assets under management. That is positive, but modest. And we heard of outflows in Asia and emerging markets.

The company told us that it “transformation program remains on track“. But until a transformation actually transforms, uncertainties as we see them today remain a major risk.

Can abrdn continue to pay the dividend while containing the nasty outflows and boosting profits again? If that’s possible, the 10.8% yield and broker price target of 159p (up 35%) could be worth considering.

However, dividend predictions can be wrong, and price targets can be incorrect.

Mortgage return

OSB group (LSE: OSB) is a specialist mortgage lender, which may not seem like a great business when interest rates are falling.

The share price has struggled in 2024, down 20% year to date. But a hefty dividend yield of 9% is planned.

Moreover, forecasts show that it will rise to 9.3% by 2026, based on the current share price. And they also show sufficient coverage by revenues – of 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 are good value now. With a forward price-earnings ratio (P/E) ratio of only 4.6, the board could be right.

Interim dip

But an interim report on August 15 dealt a blow to the shares, sending their value down 19% in one day.

It appears that this is related to the pressure on net interest margins and mortgage competition. And the Bank of England’s interest rates will certainly continue to fall.

So what do I think? We’re looking at a stock with a market capitalization of just £1.4 billion. That’s a far cry from its £34 billion valuation Lloyds Banking GroupBritain’s largest mortgage lender.

And smaller banks and financial services providers tend to come out worse with any pressure.

Still, that low valuation and high dividend yield could make OSB an option for brave investors.

Dividends galore

There are many more high dividend yields among the FTSE 250 stocks, often with solid earnings coverage and strong forecasts.

The real lesson for me is that we should just forget what index a stock is in and focus on the company itself.