A beaten-down FTSE 250 inventory with dividend development! What's the catch?

Discovering a FTSE 250 inventory within the discount bin may be robust. The UK mid-cap index has climbed 15.9% increased to 21,114 factors within the final 12 months with over 170 corporations within the index making beneficial properties.

That stated, there’s one a part of the economic system that I’ve had my eye on. The maritime business has been within the information these days amid rising geopolitical tensions and better provide chain prices.

As soon as I noticed a overwhelmed down FTSE 250 inventory in that business, I needed to examine: the great, the unhealthy, and the ugly.

Trade I like

Clarkson (LSE: CKN) is an built-in maritime powerhouse. The corporate gives built-in providers protecting ship broking, analysis, finance, digital instruments, port providers, and green-driven advisory providers. 

I’ve had my eye on maritime providers for some time now. There’s potential for development with rising international commerce and an ongoing reliance on transport for a big a part of that.

The working surroundings has stabilised and freight prices have fallen. Moreover, the corporate is pushing into rising areas together with offshore wind, in addition to base and battery metals.

Sturdy financials

One factor that caught my eye was Clarkson’s interim 2024 outcomes. Revenues and underlying pre-tax revenue had been underneath strain within the six months to June, with the latter sliding 3% to £109.2m. That’s not unhealthy contemplating a reasonably bumper 12 months was had in 2023.

Underlying earnings per share of 129.1p, alongside £178.4m of money and liquidity, noticed the board declare a 32p per share interim dividend. That represents a 7% enhance from final 12 months and an unimaginable twenty second consecutive 12 months of dividend will increase for the FTSE 250 inventory.

With unchanged full-year steerage and a sturdy steadiness sheet, I believed I’d check out Clarkson’s valuation.

Valuation

The FTSE inventory has a price-to-earnings (P/E) ratio of 13.5 proper now. That appears to be a contact on a budget aspect for me, significantly given the traditionally robust dividend development.

Throw in a 2.9% dividend yield for the earnings buyers out amongst us and there’s a bit to love.

The catch

There’s no such factor as a free lunch in investing and Clarkson isn’t any exception.

One factor that stood out is a price-to-book (P/B) ratio of two.4 which is at all times price noting. Nevertheless, as it’s a providers supplier, I can look previous this primarily based on the character of its steadiness sheet and repair providing.

The FTSE 250 inventory is up practically 30% previously 12 months and sitting at 3,685p regardless of a latest wobble. That was largely as a result of buyers weren’t too impressed by the half-year outcomes.

I believe an enormous a part of that will have been the bumper 2023 interval that year-on-year figures had been being assessed in opposition to. A cyclical enterprise like Clarkson isn’t with out its dangers, however the progressive dividend coverage and ahead outlook have me kicking the tyres a little bit extra.

The decision

Investing in a FTSE 250 inventory like Clarkson isn’t with out its challenges. Trying via the brief time period, I do see some long-term potential and diversification alternatives.

Whereas I don’t have the money out there in the mean time, I’ll be trying to make investments earlier than the tip of the 12 months if I can. Any additional share worth declines in direction of the three,000p mark would put it much more firmly within the purchase zone for me.