Saga shares? I’d rather buy these FTSE 250 dividend growth stocks

After falling sharply in early April, Saga’s (LSE: SAGA) share price has continued to plummet in recent weeks. When I covered the stock on 9 April, the shares were hovering around the 60p mark, however today they’re not far off 40p, meaning they have fallen another 30%. My view in April that the stock looked “too risky” has turned out to be a good call. Hopefully, my article spared a few investors from getting burnt.

At the current share price, Saga trades on a forward-looking P/E ratio of around 5. That’s certainly a low valuation. However, I’m still not tempted to touch the shares. In my view, the group has lost the trust of its customers, and I think it could take a while to turn things around. I also tend to steer clear of companies that have just cut their dividends. So I’ll be leaving Saga shares alone for now.

Positioned for growth
One dividend stock that does look quite interesting to me right now is Workspace Group (LSE: WKP). It’s a real estate investment trust (REIT) which focuses on co-sharing office space for early-stage companies in London. It currently owns and operates around 65 properties in the capital, and is home to around 4,000 smaller companies.

The main reason I like the look of Workspace is that London’s start-up scene is absolutely booming right now. For example, last year alone nearly 220,000 new businesses were registered in the capital. As start-ups grow, they need access to office space and meeting rooms, and this is where Workspace comes in. It offers leases on flexible terms, as well as all the features that start-ups are looking for such as access to super-fast internet, cafes, and co-working space, meaning it is well placed to benefit as London’s start-up scene continues to advance.

Workspace shares have been dragged down by Brexit uncertainty recently and I think this has created a buying opportunity. Trading on a forward P/E of around 19 and offering a prospective dividend yield of 4.2%, I see considerable long-term investment appeal here.

Excellent dividend track record
Another under-the-radar dividend stock within the 250 that has piqued my interest is HICL Infrastructure (LSE: HICL). This is an investment company that focuses on infrastructure and currently has nearly 120 investments in projects such as roads, railways, hospitals and schools across the UK, Australia, Canada, France, Ireland, and the Netherlands.

What appeals to me about HICL is the stock’s dividend yield and excellent dividend growth track record. The yield is a high 5%, which is no doubt attractive in today’s low-interest-rate environment, and since paying a maiden dividend in 2007, the group has increased its payout for 12 consecutive years which is a fantastic achievement. Moreover, the company recently reaffirmed its dividend targets of 8.25p per share for next year and 8.45p for the year after, meaning further dividend growth looks likely.

HICL shares currently trade on a forward-looking P/E ratio of just 11, which to my mind is a very reasonable valuation. With the company recently telling investors that the board and investment manager are “confident in the outlook” I see the shares as a ‘buy’.

Edward Sheldon has no position in any shares 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.

Motley Fool UK 2019

First published on The Motley Fool