These 2 FTSE 250 stocks now yield more than 10% – is that income sustainable?

FTSE 250 stocks aren’t only for progress. Some are absolute income machines. I’ve simply landed on two that supply bumper double-digit yields.

If an income-hungry investor had £2,000 to tuck away, ought to they think about splitting it between these two?

Foresight Photo voltaic Fund shines

First up is Foresight Photo voltaic Fund (LSE: FSFL), an funding belief that at present affords a crimson-sizzling trailing yield of simply over 10.3%. 

The corporate invests in photo voltaic farms and battery storage, with 58 websites unfold throughout the UK, Spain and Australia. 

Regardless of a depressing 2024 for sunshine, the UK’s worst since 2013, Foresight nonetheless hit its 8p dividend goal. And that’s lined 1.4 occasions by earnings.

Administration has pencilled in an 8.1p dividend for 2025 and expects that to be lined 1.3 occasions. That offers me some confidence the yield might maintain up, though as ever, this stuff are by no means assured. 

The board is actively hedging electrical energy costs, locking in 88% of 2025 revenues and 69% for 2026. After all, this doesn’t take away all danger. If electrical energy costs plunge or the group’s deliberate Australian asset sale is delayed additional, that might squeeze money movement. 

With web asset worth slipping to £634m from £698m the yr earlier than, there’s strain to ship on disposals and preserve investor confidence excessive. 

Nonetheless, I feel income-centered buyers may think about this one. Particularly with these hedges in place and dividends forecast to maintain rising. They need to additionally bear in mind that renewable vitality is usually a unstable sector, there’s a little bit of a backlash towards web zero, and falling fossil gasoline costs might up the competitors. The shares are down 15% over one yr and 25% over 5, wiping out a lot of the income.

Foresight Photo voltaic Fund seems to be low-cost in consequence, buying and selling at a whopping low cost of just about 30% to underlying web asset worth. As ever with reductions, there’s no assure it will slim.

TwentyFour Income Fund

The TwentyFour Income Fund (LSE: TFIF) is a really totally different beast. This Guernsey-primarily based funding belief focuses on European asset-backed securities, swimming pools of mortgage and mortgage repayments bundled collectively and bought as investments. That may sound complicated, however the attraction is clear: a fats dividend.

The fund simply paid a file 11.07p over the previous yr, giving it a ten.1% yield on the present share worth. It’s been a robust performer in a distinct segment a part of the bond market, with complete returns final yr of 16.9% together with dividends.

Crucially, this fund operates a full payout mannequin: all income will get handed on to shareholders. However that additionally means there’s no buffer if issues go flawed. 

If defaults rise or liquidity dries up, the dividend might come below rapid strain. Nonetheless, with £840m in belongings and solely £26m in liabilities, the stability sheet seems to be reassuring. This dividend might endure too, however as ever, there aren’t any ensures.

Traders may think about shopping for this one for income, though I’d need to preserve an in depth eye on the financial outlook. European asset-backed securities will be profitable, however they’re not proof against volatility. There’s no low cost right here, the belief trades at a slim 0.36% premium to underlying web asset worth. I really discover that reassuring.

Each funds sit on eye-catching yields and have delivered income in robust situations. I feel they’re price contemplating however just for skilled buyers who have already got a diversified portfolio and are on the lookout for one thing just a little totally different with baggage of passive income.