How I identify dividend income opportunities with growth potential in the FTSE 250

Once again I find myself counting my pennies and rummaging through them FTSE 250 for my next big dividend purchase. There is nothing I love more than checking my dividend statement at the end of the month and calculating my passive income. It’s satisfying to see my money working hard for me.

But I’ve made mistakes in the past and my portfolio still has a few flaws. I live in eternal hope that one day they will recover.

So when I buy dividend stocks these days, I make sure to analyze the companies more closely. Returns and payout ratios are one thing, the balance sheet is another. But to really get a feel for where we’re headed, I need to dig deeper.

Past, present and future

First things first: I want to invest in a stock that I can trust. Not only must it perform well, but it must pay dividends regularly and without interruption. To do this I have to look into the past. A good dividend payer should have a long and consistent track record of making regular payments.

For example, consider two of my favorite dividend stocks. Both have a solid track record in payments.

• Primary health characteristics has a 7% yield but is currently unprofitable and in debt.

• Ashmore GroupIn comparison, it has a yield of 7.9% and is profitable with no debt.

Seems like an obvious choice? Not so fast.

Ashmore’s revenue has declined at a rate of 21.8% per year and is expected to continue to decline. The payout ratio (the portion of profits paid out to shareholders as dividends) is already over 120%. And it could rise even further if profits fall. Primary Health, on the other hand, has a payout ratio of 67%. The company has experienced strong earnings growth and is expected to continue growing at a rate of 40% per year.

A company with a high payout ratio and declining profits may have to cut its dividend if things don’t improve soon. Another example of a stock I hold is ITV. Profits are also forecast to fall next year, but with a relatively low payout ratio of just 46%, I’m not worried at the moment.

A promising stock to consider

With that in mind, here’s an up-and-coming stock that I like the look of today: MONY group (LSE: MONY). It owns the popular price comparison site MoneySuperMarket.com. The price is down 28% this year but is up 13% in two years. The return is 6.2% and the payout ratio is 86%.

Dividends have increased steadily since 2007, increasing by 8.68% per year without any cuts.

However, growth could face some obstacles. MONY faces competition from GoCompare and Compare the Market, both of which threaten its market share. Furthermore, its business model is based on a strong economy and joyful spending – any decline could send the price skyrocketing. This happened in 2020 and has had a hard time recovering since then.

However, despite weak price developments in recent years, earnings growth of 9.6% per year is forecast for the future. Even more promising, the return on equity (ROE) is expected to be over 42% in three years.

This puts it at the top of my list of potential dividend stocks to consider buying in the next month.