There are many shares on the FTSE 250 with excessive yields and rock-bottom costs. Sadly, every of those two elements is a results of the opposite — because the price drops, the yield rises.

In fact, everybody likes a excessive yield particularly if it’s at a cut price — however that’s not all the time factor. The price might simply preserve dropping till the corporate goes bankrupt. When in search of dust low cost shares with dividend potential, it’s essential to evaluate the long-term viability of the corporate.

Shares within the price-comparison media platform MONY Group (LSE: MONY) are down 23% previously yr. I not too long ago purchased among the shares when the price fell to a two-year low a couple of months in the past. Nonetheless, it’s been sluggish to get well so it nonetheless seems like cut price.

The important thing driving elements behind my determination stay in place, a 6.5% dividend yield, first rate earnings development potential and future return on fairness (ROE) anticipated to be round 40%.

The present price stage of round 180p has confirmed to be a gorgeous shopping for level for traders in each 2014 and 2022. Nonetheless, previous efficiency isn’t indicative of future outcomes. So I have to additionally consider the corporate’s market place, demand for its companies, and managerial efficiency.

Financial challenges

Beforehand referred to as Moneysupermarket.com, the enterprise rebranded as MONY Group final Might. It now operates as a specialist in technology-led money-saving platforms, together with a number of price comparability web sites.

The corporate permits customers to match costs on a variety of merchandise, together with power, automotive, residence and journey insurance coverage, mortgages, bank cards and loans. Its subsidiaries embrace MoneySuperMarket, TravelSupermarket, IceLolly, Resolution Tech, Quidco, and MoneySavingExpert.

Though it’s thought of a market chief, it nonetheless operates in a extremely aggressive business. The rise of a number of different outfits competing for market share is an ongoing danger pressuring the corporate. Regulatory modifications within the UK monetary companies sector are one other concern that might influence MONY’s operations and profitability.

Nonetheless, the almost definitely wrongdoer behind its latest losses is inflation. Client spending declined considerably by 2022 and 2023 because the economic system suffered a downturn. Many firms utilizing price comparability companies have suffered losses and, subsequently, so have the websites themselves.

Lengthy-term potential

Regardless of the dangers talked about above, I see good long-term development potential in MONY Group.

We’ve already skilled the primary rate of interest minimize this yr and extra are anticipated, with the goal to assist cut back inflation. The advantages of a revitalised economic system and elevated shopper spending could be a boon for the price comparability business.

In that case, MONY’s in good stead to get pleasure from renewed development. The share price is at present buying and selling at solely 13 occasions earnings, nicely beneath the UK market common.

With earnings forecast to develop 8.6% a yr, that determine might come down even additional. It’s already 51% beneath truthful worth, based mostly on anticipated money flows, and is forecast to rise a mean of 42% within the coming 12 months.

It seems to be a well-established enterprise working in a high-growth business and buying and selling beneath worth resulting from exterior elements.

I’m as optimistic as ever about its long-term potential and consider it’s value contemplating as a part of an income-focused portfolio.