2 FTSE 250 dividend shares with double the current index yield

Jon Smith presents the case for two FTSE 250 stocks with yields above 6.8% that could provide an investor with high levels of income going forward.

Posted by Jon Smith

Published 25 September

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

The average dividend yield of the FTSE 250 is 3.38%. Of course, within the index, there are many different stocks, some with higher or lower respective yields. For investors who like to be active in their picks, doubling the index yield can be possible, even without having to take on a really high level of risk.

Building the future

One option to consider is International Public Partnership (LSE:INPP). The company invests in a large diversified portfolio of infrastructure assets and businesses. These are often under public-private partnership structures or similar long-term contracts like building schools.

Should you buy International Public Partnerships Limited shares today?

Over the past year, the share price is down a modest 5%, with the dividend yield at 6.94%. One reason why I believe the dividend is sustainable is due to the nature of the contracts. They often span several years, with deals linked to inflation, which protects the cash flows and makes it predictable. As a result, the company can look to budget around revenues with some visibility. Although this doesn’t mean it’ll never post a loss, it does provide confidence that management can generate cash in future years sufficient to cover dividend commitments.

It also has a clear dividend policy, so investors know what they are getting themselves into. For example, International Public Partnership says that it expects full dividend cash coverage from net operating cash flow before capital activity. This is quite important as it means the company expects that its operating cash generation (before considering things like buying or selling assets) is sufficient to cover the dividend.

One risk is the concentration of projects with the government. Even with long-term contracts, if the administration decides to cut back spending on certain areas, it will eventually have a negative impact on the company’s revenue overall.

Buying a potential dip

Another idea is Greencoat UK Wind (LSE:UKW). It’s a UK-listed renewable infrastructure investment trust focused exclusively on UK wind farms. Over the past year, the stock is down 22%, with a current dividend yield of 9.66%.

Let’s first address the share price fall over this time period. Part of this reflects a drop in the net asset value (NAV). The stock does follow the movements in the value of the portfolio, which is its wind farms. Therefore, lower valuations have dragged the share price down with it.

Another factor has been that wholesale electricity prices have come down compared to the highs. That directly affects revenue from electricity sales, especially for parts of the portfolio not in fixed contracts. I’m not too concerned here for the long term, as commodity prices are volatile and therefore could bounce back just as quickly as they fell.

Despite these problems, the dividend per share has been increasing over the past few years. It aims to align the dividend increase with inflation, which is a positive. In the latest H1 2025 results, the dividend cover was 1.4. Anything above one shows that the current earnings per share can completely cover the dividend. Therefore, I don’t see any immediate worry with any potential cuts.

Even though the above stocks are higher risk than normal, the large dividend yield could make them attractive enough for an investor to consider.