Business development to success and growth concept FTSE 100 250 350.

There’s always a good reason to look for stocks that can give me plump returns. But the reason is even greater when I own the stock myself. As the FTSE250 investment platform CMC Markets (LSE: CMCX), which has a massive dividend yield of 11.2% right now. It even rivals the best FTSE100 yields.

What’s wrong with CMC Markets?

but here’s the catch. The stock may have done well during the pandemic, as savings have increased, as has interest in investing. But that phase is long gone. After peaking in the six months ending September 2020, the company’s revenue and net profit declined through 2021. It even lowered its earnings expectations. And cut dividends, which means its yield could drop this year. So it’s no surprise that CMC Markets has seen its price plummet over the past year. It is now trading at half the level it was at at the start of 2021.

Cheap FTSE 250 stock

This drop in the share price resulted in an abysmal price/earnings (P/E) ratio of less than 7 times. And the number looks even smaller if I consider its forward P/E, based on its earnings forecast for the next fiscal year, at around 2.5x. Even taking into account the recent correction in its finances, it doesn’t get any cheaper than this, if you ask me. This is all the more true as its prospects do not look bad at all.

A few days ago it released its latest business update, which is succinct but quite enlightening in my opinion. It says assets under administration for its leveraged and unleveraged businesses are near record highs. This is an important statement as the company plans to split the business into two, which could well be beneficial for shareholders. The fact that they continue to be healthy is encouraging. I also like that the company follows up with the statement that “It is progressing well with its strategic initiatives, including the ongoing development of the UK non-leveraged investment platform”which bodes well for the future.

what i would do now

In short, what I am saying is this. The FTSE 250 stock has undoubtedly seen a fall from grace recently. Its performance softened, dividends were cut and the share price fell gloriously. Speculation of the company splitting into two parts could have added to investor uncertainty about the stock.

Yet, I believe it is precisely because of these developments that there is a lot to like about CMC Markets now. The decline in its share price means its market valuation is in an incredibly low single digit given its earnings forecast for the next financial year. And it remains a profitable title. Plus, the company split might just be a good thing for shareholders – we’ll have to see. If I hadn’t already bought the stock, I would definitely buy some of it now in anticipation of future growth and dividends.

This cheap FTSE 250 stock with an 11% dividend yield crashed last year and appeared first on The Motley Fool UK.

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Manika Premsingh is the owner of CMC Markets. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.

Motley Fool United Kingdom 2022