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There are loads of FTSE 250 shares paying generous dividends at the moment (7 April). But income shares are sometimes overlooked in favour of stocks that are perceived to be more exciting, for example, ones that are believed to have better growth prospects.
However, by reinvesting dividends itâs possible to take some high-yielding FTSE 250 shares and replicate the success of growth stocks.
Leading the way
There are presently eight stocks on the index with a yield in excess of 10%. Their average is 11.4%.
| Stock | Yield (%) |
|---|---|
| SDCL Efficiency Income Trust (LSE:SEIT) | 15.1 |
| Foresight Environmental Infrastructure | 11.8 |
| The Renewables Infrastructure Group | 11.4 |
| Bluefield Solar Income Fund | 10.9 |
| Energean Oil & Gas | 10.8 |
| Greencoat UK Wind | 10.5 |
| Victrex | 10.4 |
| TwentyFour Income Fund | 10.1 |
| Average | 11.4 |
If this level of return was maintained, a £20,000 investment would grow to £297,276 after 25 years. I reckon an investor who generally prefers growth stocks to dividend shares would be happy with this result.
So yes, to answer my headline question, it’s possible to turn £20k into a much higher amount. But big returns should be treated with caution. Thereâs a rule of thumb that says if a stockâs yield is close to twice that of the UKâs 10-year gilt rate (currently around 5%), then itâs likely its dividendâs going to be cut.
Top of the pile
A closer look reveals that the FTSE 250âs highest yielder is SDCL Efficiency Income Trust. It invests exclusively in the energy efficiency sector and has a £1bn+ portfolio.
The table below shows that a collapse in the trustâs share price is the biggest contributor to its above-average yield.
| Financial year | Net asset value per share (pence) | Dividend per share (pence) | Share price (pence) | Yield (%) |
|---|---|---|---|---|
| 31.3.21 | 102.5 | 5.50 | 111 | 5.0 |
| 31.3.22 | 108.4 | 5.62 | 118 | 4.8 |
| 31.3.23 | 101.5 | 6.00 | 84 | 7.2 |
| 31.3.24 | 90.5 | 6.24 | 59 | 10.6 |
| 31.3.25 | 90.6 | 6.32 | 48 | 13.2 |
| 31.3.26 | 87.6 (at 30.9.25) | 6.36 (target) | 42 | 15.2 |
Since March 2021, its shares have crashed more than 60% and its dividend has increased by around 15%. Had its share price remained unchanged, it would now be yielding 5.7%. Although still impressive, I suspect fewer alarm bells would be ringing.
The table also shows an increasing divergence between the share price and net asset value (NAV) per share.
Clearly, all’s not well. Fortunately, itâs easy to see what the problem is.
What’s going on?
At 30 September 2025, SDCL reported debt equal to 71.9% of its NAV, breaking its own rules which limit this to 65%. Further borrowing has been suspended. Some of the increase in gearing is due to the investment manager taking a âmore cautious view of certain valuation driversâ in a volatile market.
More fundamentally, itâs now treating a âtax equity bridge loanâ as debt when calculating its gearing ratio. This is equivalent to 6% of its NAV.
Since exceeding the threshold, the trustâs been trying to sell some of its assets. But itâs taken longer than hoped. In March, it announced that it had realised £105m. This returns it close to its 65% limit. Further disposals are planned.
Final thoughts
However, it worries me that the deal was done at a 9% discount to the carrying value of the assets. The trust puts this down to a buyersâ market.
Current valuation calculations assume that SDCLâs investments will have access to the necessary finance to help them grow. If the trustâs unable to unlock the required debt it might be forced to use some of the cash set aside for its dividend. It looks as though investors are already pricing this in.
The trustâs operating in a growth sector and I donât see any immediate threat to its dividend. But thereâs too much negativity surrounding the stock for me to buy. Even so, there are plenty of other high-yielding shares to look at.
The post Could these 8 FTSE 250 shares turn £20,000 into £297,276 within 25 years? appeared first on The Motley Fool UK.
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More reading
- Meet the top 10 highest-dividend-yield stocks in the FTSE 250
James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat Uk Wind Plc, London Stock Exchange Group Plc, and Victrex Plc. 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.
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