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I do love a bargain, whether it’s hitting the high street or filling my portfolio with cheap UK shares. And doing some research over the last week, the following FTSE 250 shares have attracted my attention.
Each trades on a rock-bottom price-to-earnings (P/E) ratio. They also carry a dividend yield that could supercharge investors’ near-term passive income. But are they really bona-fide bargains, or are they simply classic value traps?
A bright dividend share
Foresight Solar Fund (LSE:FSFL) has exceptional appeal as an income share, in my view. Cash flows are broadly stable, thanks to the defensive nature of its operations, along with its inflation-linked turnover and long-term government-backed contracts.
This has given it the strength to raise dividends every year since its IPO in 2013. Dividends are paid quarterly, too, allowing investors the chance to reinvest their income more regularly.
Today its dividend yield is an enormous 8.9%.
That’s not to say dividends are completely without risk. Power generation can dip sharply when solar radiation falls. Changes to government support could also hamper future dividend growth and yields. Yet I still feel it’s more secure than most other dividend-paying shares.
It also trades on an undemanding P/E ratio of 10.6 times.
Cyclical dangers
Real estate investment trusts (REITs) like British Land (LSE:BLND) can be great ways to source a second income. Under sector rules, a minimum of 90% of annual rental earnings should be paid out in dividends.
But I’d have significant reservations about parking my cash in this FTSE 250 share. Through its large retail portfolio spanning malls, shopping parks, and high street outlets, it faces significant structural threats like e-commerce alongside cyclical dangers. Its leisure and office outlets are also sensitive to the worsening UK economy, with the latter also under threat from the ‘work-from-home’ trend.
I prefer its plans to expand in the high-growth urban logistics sector. This has substantial long-term potential as online shopping continues to grow. But today, this forms only a small part of the company’s overall portfolio.
Not even British Land’s low P/E ratio of 5.8 times and 6.6% dividend yield are enough to encourage me to invest.
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Another reliable dividend stock
Primary Health Properties (LSE:PHP) is a REIT I’d prefer to add to my portfolio. I already hold its shares in my ISA, in fact. And its cheap P/E ratio of 11.2 times and high 7.3% dividend yield are tempting me to buy more.
Along with Foresight Solar, I think it’s one of the FTSE 250’s most attractive value and dividend stocks.
Like the aforementioned renewable energy stock, its operations are largely unchanged by outside economic factors. Furthermore, around nine-tenths of rents are guaranteed by government bodies such as the NHS. These benefits allow it to pay a large and growing dividend every year.
At Primary Health Properties, cash rewards have risen every year since 1998.
Future earnings and dividends could be impacted by changes to health policy. But I’m confident over the outlook here, as the UK’s rapidly ageing population drives demand for additions and upgrades to primary healthcare facilities.
