When looking for dividend shares on the FTSE 250, I at all times make certain to examine each the payout ratio and the year-on-year development. These necessary metrics inform me two issues: how nicely funds are lined and the speed at which dividends enhance.

Ideally, the corporate ought to have a low payout ratio (under 50%) and respectable annual dividend development (a minimum of 5%). This means it’s devoted to making sure shareholder returns stay constant and uninterrupted.

When constructing a long-term passive earnings portfolio, it’s crucial that dividend returns are common and dependable. Along with the payout ratio, it’s necessary to make sure the corporate has a strong stability sheet with notable earnings development and sustainable debt ranges.

Utilizing these standards, I’ve recognized two promising candidates on the FTSE 250 that dividend buyers may need to take into account for an income-focused portfolio.

OSB Group

OSB Group‘s (LSE: OSB) a UK-based specialist mortgage lender, primarily serving the buy-to-let and residential sectors by way of its subsidiaries. Fashioned from the 2019 merger of OneSavings Financial institution and Constitution Court docket Monetary Providers, the financial institution focuses on skilled landlords and complicated underwriting.

As a challenger financial institution, it faces stiff competitors from bigger rivals within the mortgage {industry}, which might threaten its market share. Plus, rising funding prices in a subdued housing market put it susceptible to losses from defaulters.

But it stays devoted to shareholders. Since Covid, dividends have grown quickly from 4.9p per share to 33.6p. Reassuringly, they’re well-covered by earnings, with a payout ratio of solely 43.3% and supported by sturdy financials.

Final yr, underlying pre-tax revenue got here in at £442.9m, a 4% enhance from 2023. Working earnings grew modestly to £418.1m from £374.3m, whereas earnings per share (EPS) improved to 78p from 66p.

Investec

Investec‘s (LSE: INVP) a dual-listed financial services company operating in the UK and South Africa, offering a range of services including private banking, wealth management and corporate and investment banking. The group’s lately centered on streamlining operations and enhancing capital effectivity.

It’s uncovered to unstable financial circumstances in each the UK and South Africa, together with potential credit score impairments and regulatory challenges. Notably, the corporate lately put aside £30m in provisions associated to an industry-wide investigation into motor finance fee practices.

Like OSB, dividends have elevated shortly because the pandemic, rising from 11p per share to 34.5. Previous to that, it loved 10 years of strong dividend development, supported by a low payout ratio of 49%.

The financial institution’s set to launch its 2024 full-year outcomes Wednesday (22 Could). A pre-close buying and selling replace suggests a possible 12% enhance in working revenue and a slight drop in earnings per share (EPS). Final yr, it noticed a 9.1% enhance in full-year earnings, with income rising 5% to £2.1bn. Most notably, its cost-to-income (C/I) ratio improved to 57%, reflecting the continuing effectivity measures.

Prioritising long-term earnings

For buyers looking for earnings with out compromising on high quality, I feel these two FTSE 250 dividend shares provide a lovely proposition. Their mixture of excessive yields, low payout ratios and resilient enterprise fashions might make them wonderful additions to contemplate for a passive earnings portfolio.

When aiming for generational wealth, a long-term mindset can’t be overstated. That is significantly pertinent in a high-interest charge atmosphere, the place common earnings stays a prime precedence for the market.