Several red flags

Wizz Air (LSE:WIZZ) is down 33% in the past month alone. It’s down 41% in the last year, showing how the bulk of this move has come in just the past few weeks.

This is understandable, as the Middle East conflict is disrupting routes and profits. In fact, last week the company warned it could cut full-year 2026 profit by about €50m. This is due to a mix of suspending some routes in the region and rising oil prices linked to the conflict, which are pushing jet-fuel costs higher and hitting operating margins hard.

Even though this is impacting the airline sector as a whole, Wizz is more exposed because it has been expanding aggressively in the Middle East.

I see two scenarios from here. Either the conflict in the region continues for some time, in which case it will compound Wizz Air’s existing problems. Or the tensions ease. However, I doubt many will be keen to jump on a plane to the impacted areas anytime soon. Therefore, neither situation represents a strong buying case in my view.

Some may disagree, and flag up that the stock could be undervalued, with a price-to-earnings ratio of 5.05. It’s true that in the long run it could represent good value, but I think there’s too much uncertainty right now to give me any confidence to justify buying the stock.

Dealing with volatile markets

On the flipside, I do think that Plus500 (LSE:PLUS) looks attractive. The stock is down 13.5% in the past month. Some of this move can be put down to general investor concern. However, the company isn’t really negatively impacted by the geopolitical tensions. In fact, the volatility we’re seeing in the stock and energy markets right now is likely to boost the company’s performance.

Plus500 makes a small commission when investors trade on the platform. With people trading oil, gold, and other commodities more actively, I believe revenue in the coming quarter should increase. The company could also experience an increase in account applications, as more people discover financial markets and take a view on the direction of stocks and other assets.

Over the past year, the stock is up 55%. Last month, preliminary 2025 annual results beat market expectations on both revenue and profit. I think the dip right now is just a short-term move that could quickly see people step in. Therefore, I think it’s a share to consider buying.

One risk was the news that the CEO, CFO, and CMO all sold some of their equity holdings in February. If more insider share sales happen, it’s not a great look for the company.

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Since the turn of the century, our midcap index has soared by around 250%, more than five times the modest gains of the main index over the same period. 

That’s largely because the FTSE 250, which holds many medium-sized companies, tends to have a bigger bias toward domestic UK businesses and higher-growth sectors.

As the UK economy slowly steadies after years of uncertainty, I reckon this index could shine again in the decade ahead. 

Here are two compelling examples of mid-cap stocks that illustrate the hidden potential on offer.

An investment firm with income potential

Pollen Street (LSE: POLN) is an independent alternative investment manager. It specialises in private equity and credit, with a proven strategy that’s delivered solid growth.

For income investors, it’s especially attractive. The shares currently offer a chunky 6.8% dividend yield, with a comfortable payout ratio of 68%. Better still, Pollen Street has paid dividends for nine straight years.

The valuation also looks compelling. The shares trade on a low price-to-earnings (P/E) ratio of just 10 and a price-to-book (P/B) ratio of 0.84 – suggesting its intrinsic value outshines the price.

My only concern would be its heavy reliance on private credit and equity markets — any sharp downturn in these areas could squeeze performance fees. There’s also the threat that tighter regulation of alternative asset managers could pressure margins in future.

But financially, the company looks to be in a healthy position. Revenue stands at nearly £100m, with earnings up 25% year on year. Plus, it boasts a low debt-to-equity ratio of 0.33, alongside £157m in operating cash flow.

The trading platform that’s taking off!

Next is Plus500 (LSE: PLUS), a global online trading platform that’s enjoyed a strong rebound. Its shares are up 47% over the past year, helped by an impressive second quarter in 2025 when revenue climbed 15%. Management is confident about its full-year targets.

It’s another attractive pick for passive income. Plus500 yields 5.2%, with a sustainable payout ratio of 61.8%. Impressively, dividends have grown 30% year on year, and the company has lifted its payout for 12 consecutive years.

Valuation-wise, the shares aren’t overly stretched at 12.2 times earnings, although the P/B ratio of 4.8 is on the high side. However, that premium comes alongside stunning profitability: an operating margin of nearly 44%, a net margin above 35%, and a sky-high return on equity of 40%.

Risks? The biggest is its dependence on retail trading volumes, which can dry up quickly if market volatility subsides. Plus, regulatory crackdowns on leveraged trading could hurt future revenues.

Fortunately, it has a rock-solid balance sheet, with negligible debt of £12.6m versus £514m in equity and almost £800m in assets.

For me, these two stocks underline why investors might want to look beyond Footsie blue chips. The FTSE 250 has long outperformed its bigger sibling, and with under-the-radar opportunities like these, I suspect it could do so again in the decade ahead. 

For those seeking growth, value and reliable income, there’s still plenty of untapped potential on offer.

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With that in mind, it’s no surprise that since its inception the FTSE 250’s delivered close to an 11% annualised return compared to the FTSE 100’s 8%. So how has this collection of companies been doing lately? And just how much money have investors made in the last five years?

Surprising results

Usually, when stocks defy investor expectations, it’s considered a good thing. But not if the companies fall behind analyst targets. And lately, FTSE 250 stocks have sadly done the latter. In the last five years, the UK growth index has delivered a total return of 44.9%. That means anyone who put £100,000 to work in July 2020 is now sitting on £144,900.

That’s not bad, but on an annualised basis, it works out to just 7.7% — significantly behind its long-term average. What’s going on?

Smaller businesses have the advantage of being nimble. This allows them to shift and change strategy much faster than larger enterprises. But as a downside, they’re also far more sensitive to domestic economic conditions. And it’s no secret that the British economy hasn’t exactly been a beacon of growth lately.

Weak consumer purchasing power, due to inflation, has created an unwelcome headwind for many FTSE 250 stocks. And while conditions are steadily improving, the demand still pales in comparison to that from international markets – an area where most FTSE 100 firms operate.

Finding exceptions

While the index as a whole has underperformed, not all of its constituents have followed the trend. Take Plus500 (LSE:PLUS) as an example. The fintech enterprise provides a trading platform for retail investors to access the market. But unlike stalwarts such as Hargreaves Lansdown, it provides far more access across investing instruments (including the riskier ones) suitable for traders.

With three of the last five years delivering strong stock market gains, demand for its platform has increased both here in the UK and abroad. This, combined with financial product expansion and robust user growth, has resulted in higher deposits and more trading activity.

As such, revenues are ticking upward. And since the platform operates mostly with fixed costs, each additional user improves profit margins, which, on an underlying basis, now stand at 45%. And this has resulted in a staggering 153% return since July 2020, even before counting dividends, enough to turn £100,000 into £253,000.

Risk versus reward

At the heart of Plus500’s trading offerings are CFDs. These are exceptionally risky financial instruments that can easily obliterate a portfolio. But just like penny stocks, they can also deliver phenomenal gains, hence their popularity despite an estimated 80% of retail investors losing money.

These instruments work best when the markets are volatile. But during calm periods, trading activity slows, causing Plus500’s income to suffer, resulting in lumpy cash flows.

Is this a stock worth considering? The shares are too dependent on unpredictable market conditions, in my opinion. So this isn’t a business I’m interested in, especially since there are other promising and lower-risk opportunities to capitalise on in the FTSE 250 today.

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Details of the contender

I’m talking about Plus500 (LSE:PLUS). Operating in over 60 countries, the fintech firm provides online trading platforms for retail investors. Over the past year, the growth stock‘s risen 59%.

Plus500’s business model revolves around offering trading services, allowing customers to speculate on the price movements of various financial instruments, ranging from stocks to commodities. It makes money from commissions and transaction fees associated with the trading. Put another way, the more clients trade, the more money Plus500 makes.

The latest trading update from the end of April showed a 13% jump in Q1 revenue, with EBITDA up 23% versus the same period last year. One of the largest areas of growth came from US stock market futures contracts. This doesn’t surprise me, as this is one of the main ways that international investors can speculate on the US market. Given the volatility since President Trump’s inauguration in January, trading in this area has skyrocketed.

More volatility ahead

The share price could continue to outperform, given the volatility still ahead in the second half of the year. This is relevant for US stocks, with tariff chatter and trade uncertainty still high.

The business also recently announced the conditional acquisition of Mehta Equities in India. This inorganic growth through acquisitions allows Plus500 to tap into different geographies. I think a continued mix of this type of strategy and growth from existing clients should enable profits to keep increasing into next year.

One risk is that the firm makes a large amount from a concentrated pool of very active clients. This could mean a large negative hit if some key clients turn to competitors.

£1k potential

Q1 earnings were $93.8m. If I assume this is repeated for the coming quarters, this would equate to a profit for the year of $375.2m. For 2024, this figure was $342.3m. So the potential increase is just under 10%. Given the price-to-earnings ratio’s 13.15, I don’t see it as overvalued. Therefore, I’d expect the share price to rally around 10% in the coming year if trading updates show that the performance in Q1 is being repeated.

Given the volatility I expect, this 10% is more of a baseline. If we repeat the April whipsaw price movements, this 10% gain could double to 20% as earnings spike for Plus500.

On that basis, I think £1k could grow to £1.1k or £1.2k. Granted, this isn’t the same kind of return as noted from the past year, but it’s still very respectable and therefore worthy of consideration.

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Primed for success

The first idea is Plus500 (LSE:PLUS). The FTSE stock has rallied by 51% over the past year. It has even managed to move higher over the past month despite the volatility. One key reason for this is that the whipsaw price action in different asset classes is good for business.

The trading and investing platform makes money in several ways. Yet the largest driver is making a small spread on each transaction placed by clients. So, the more trades that get placed, the more profitable Plus500 becomes. Typically, when there’s not much going on in the stock market, it’s bad for business as no one is really buying or selling. But last Wednesday (April 9), we saw approximately 30bn shares traded across US exchanges! This marks the highest single-day volume on record.

I believe the huge interest in markets right now will translate into strong company results. Even though the dust might settle in the short term and dent its business, we still have several years ahead of President Trump, providing ample time for volatility to spike again.

One risk is that the sector is becoming increasingly competitive. FTSE 250 peers like IG Group and CMC Markets do basically the same thing. They are all focused on gaining market share from the others.

Resetting expectations

A second growth stock to consider is Raspberry Pi (LSE:RPI). Although its share price has tumbled 28% in the past month, it hasn’t been publicly listed for a year, but it’s currently still trading comfortably above the IPO price of 280p.

One reason the stock has fallen is that 2024 results released at the start of April didn’t meet investor expectations. Revenue for the year fell by 2% compared to 2023, with operating profit down 4%. Even though this might not seem terrible, it’s meant to be a growth stock and a darling of the UK tech space. People were looking for year-on-year gains, which wasn’t the case.

Despite this disappointment, as people calm down I think the dip will get bought. A total of 22 product launches happened in the year, and “given the planned product release schedule and mix of sales, gross profit per unit is expected to increase year-on-year.” The company laid the foundation in 2024 and it should see the financial benefit in 2025.

The results also spoke of a “number of promising direct discussions with major prospective OEM customers”. If a few of these can progress, I’d expect the share price to spike when updates get shared with the public.

Of course, the high bar of expectations means that if results aren’t brilliant, the risk going forward is a further share price fall. Yet I think the recent move reflects a reset, with the valuation more attractive now for investors to consider.

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Unfortunately, very few are financially literate at that age! Yet even from the age of 35, big things can develop over the years with consistency and discipline.

Choosing where to allocate cash

A lot will focus on the end goal of £1m and miss the point that to potentially hit that figure, the strategy needs to be sound. I’m talking about deciding what to invest in.

For an investor aged around 35, they’ll likely be working for several decades more. So they’re less reliant on stocks that provide income and likely can take on more growth stock exposure.

Growth shares indeed have a higher risk, as the share prices can be more volatile. That’s why if someone is close to retirement age, these aren’t the best type of shares to own. Yet, with a multi-decade time horizon, growth stocks in sectors likely to be the future (eg renewable energy, AI, tech) should do well.

As a result, I believe an investor should allocate 80% of funds to growth stocks and regularly buy more each month as funds permit. It’s hard to perfectly forecast capital appreciation, but based on historical performance, an annual growth rate of 8-10% is reasonable.

The remaining 20% can be used for some dividend shares and value plays. Don’t get me wrong, there are some great dividend shares with yields of 8-10%. This can act as a buffer during future market corrections when the growth part of the portfolio slows. During this time, the income from dividends can help keep the portfolio progressing.

A FTSE 250 case study

In terms of an example, an investor could consider Plus500 (LSE:PLUS). The FTSE 250 business provides an online trading platform geared around the retail market.

It makes money based on client activity, making a small commission each time someone buys or sells a stock, bond, cryptocurrency or something else. As a result, it does well when markets are volatile, with big price swings.

Due to the good tech interface and wide range of trading products, it’s grown significantly over the past few years. The share price is up 53% over the past year, with strong gains evident over a longer period too.

Looking forward, I think this can be maintained. Certainly, I think markets will be volatile over the coming year based on tariff uncertainty, central bank actions and geopolitical conflicts.

One risk is that competition in this area has increased recently. CMC Markets and IG Group are two other FTSE 250 companies with similar offers and will target Plus500 clients.

The million-pound idea

I don’t know the exact retirement age for someone aged 35, but I’m going to assume it will be 67. On that basis, investing £600 a month in a portfolio that grows on average by 8% could be worth £1.07m by that finishing point.

Of course, a variety of factors could cause this end figure to be lower or higher. But it certainly gives an investor a ballpark of the amount and target return to try and aim for.

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If I had £2,000 to invest, I could buy a total of 220 shares in both stocks. Splitting my pot down the middle, I could snap up 165 HSBC shares at 606p per share. The other half would buy me 55 Plus500 shares at 1,787p per share.

Here’s why I like the look of both picks!

HSBC

As one of the world’s leading banks, the past 12 months or so have been a tad difficult for HSBC. This is due to wide macroeconomic volatility. However, the business hasn’t been alone as many stocks, especially financial services stocks, have been impacted.

The shares have meandered up and down but are only down 1% over a 12-month period from 617p, at this time last year to current levels.

Recent turbulence has been a bit of a double-edged sword, in my view. Higher interest rates have helped boost HSBC’s coffers. At the same time, chances of defaults have increased too. Plus, HSBC’s key growth market, Asia, has been struggling due to a flagging Chinese economy. This is the main risk I’ll keep an eye on that could hurt future performance and returns.

As a long-term investor, short-term issues don’t worry me too much. HSBC’s longer-term outlook is favourable, in my opinion. Its focus on Asian markets, where there is potential for high growth, could help boost performance and returns, and where my bullishness stems from.

Finally, the shares look good value for money on a price-to-earnings ratio of just six. Plus, a dividend yield of 8% at present is attractive, and looks well covered based on the firm’s balance sheet. However, I’m conscious dividends are never guaranteed.

Plus500

Online trading platform Plus500 has some key bullish traits that attract me as a passive income seeker.

Before I dive into them, it’s worth noting that the shares are on a good run in recent months. Over a 12-month period, a rise of just 2% from 1,743p to current levels looks modest. However, since October 2023, the shares are up 42% from 1,254p, to current levels.

The first bullish trait I’m drawn to is the fact that Plus500 has no debt on its balance sheet. This is crucial, as it can reinvest its profits into the business for growth, and reward shareholders well if it chooses to do so. Next, the business has an excellent record of performance and growth. However, I’m conscious that past performance is not a guarantee of the future.

There are a couple of risks I’m wary of though. Firstly, competition is ramping up in the industry. This could hurt Plus500 as it looks to enter new markets for growth. A bad move could hurt its balance sheet, and potentially returns too. The other issue is that analyst forecasts profits could come under pressure next year. I’ll keep an eye on this as it could mean dividends are cut.

Finally, a dividend yield of 7.6% and the shares trading on a P/E ratio of just seven make the investment case even more attractive for me.

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I believe one of the most effective ways to do that is with a portfolio of high-yield dividend stocks.

Dividends are a portion of profits that companies pay shareholders as an incentive to invest. A dividend yield represents the annualised percentage, usually paid in increments throughout the year.

I’ve spent a lot of time researching the UK stock market to discover dividend-paying companies that are likely to provide me solid returns for years to come. 

Today, I’m considering one FTSE 100 and two FTSE 250 companies that I think offer some of the best dividend-paying shares on the market currently.

Burberry Group

Famous for its luxury bags and coats, Burberry Group (LSE:BRBY) is one of the UK’s most well-known and beloved fashion brands.

Recently, however, it’s struggled to reach the highs of previous years. In January 2024, shares hit a four-year low of £12.30, down by almost 50% over the previous 12 months.

But things are looking up and Burberry is proving its value in the dividends department. 

The company’s balance sheet is solid, with a debt-to-equity (D/E) ratio of 35% and a relatively good net profit margin of 14.5%. This makes it a profitable company that’s unlikely to default on loans any time soon.

With a 4.8% dividend yield, it’s the lowest on my list – but a more established company than the others. When building my dividend portfolio, I must strike a balance between high-yield and reliable stocks, so I’d consider it a good addition.

Plus500

Plus500 (LSE:PLUS) provides online trading services via an internet platform and mobile app. The FTSE 250 listing has a moderate £1.4bn market cap at the time of writing.

It sports a higher-than-average dividend yield of 7.3%, with the next dividend scheduled to be paid out on 11 July this year. Although dividend payments have been unstable in the past, the company has enjoyed consistent growth with low volatility.

This means it could be a reliable addition to my portfolio, with less chance to incur a sudden price drop. However, analysts forecast an 8% decline in profits over the coming years. That’s a risk, because Plus500 may choose to skip some dividend payments if profits are too low.

But with no debt and a near-flawless balance sheet, I’m confident that Plus500’s high yield dividends would provide me decent returns over the long run. 

Dunelm Group

Speciality homewares retailer Dunelm Group (LSE:DNLM) is a £2.3bn FTSE 250 company that offers a decent 6.7% dividend yield. The share price enjoyed consistent growth over the past 16 years, rising almost tenfold from £1.18 in 2008 to £11.50 today.

The next dividend is due on 9 April, with the ex-dividend date set for 14 March. Dividends are paid out on all shares purchased prior to the ex-dividend date.

Although I like Dunelm’s dividend yield, payments have been volatile and sporadic over the past few years. Furthermore, its earnings are forecast to grow slower than the UK market, likely limiting returns beyond the dividend.

This would make it a less reliable addition to my portfolio, and probably one I would skip over for now.

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Poised for take-off?

TUI AG (LSE:TUI) was one of the firms hardest hit by the pandemic. As a flight and holiday operator, lockdowns meant business all but dried up. Even over the course of 2021, many were cautious about going abroad again.

This long road back to financial recovery has been reflected in the share price. Even if I take out the volatility around the stock market crash in early 2020, the share price is still down 58% over the past three years. Over the last year, it’s down 36%.

I think the main risk going forward is investors being too pessimistic and writing the firm off.

At the current levels, I think the stock is dirt cheap. This is based on what future earnings could look like. The business recorded a profit after tax of €532m in 2019. After losing billions in 2020 and 2021, the loss for 2022 shrunk to €212m. In the latest update for 2023, the report said “we reconfirm our expectations to increase underlying EBIT significantly for FY 2023”.

So it’s clear to me that within the next couple of years, TUI should flip back to a similar level of profitability seen in pre-pandemic 2019. If this is correct, then the share price should jump considerably from its current low.

Finding the plus side

The other firm on my radar is Plus500 (LSE:PLUS). The FTSE 250-listed online retail trading platform has struggled over the past year. This has been due to lower volatility in some markets and also heightened competition. As a result, the share price is down 20% over the past year.

Despite this, the company has been pushing to grow in key markets. This includes the US, Japan and the UAE. The Q3 update showed this expansion is going well.

The stock looks cheap to me based on both the present and future readings. As we currently stand, the price-to-earnings ratio is 4.9. This is dirt cheap, far below the benchmark figure of 10 that I use to assign a fair value.

Looking at the future, the investment being made to push into large new markets could yield some fantastic results. Granted, this push can also be seen as a risk, with competitors jostling for market share. Yet any increase in revenue can filter down quickly to the bottom line. This is thanks to the high EBITDA margin of 48%. Put another way, Plus500 has a low cost base that allows more revenue to turn into profit.

I believe investors should take a closer look at both ideas.

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Not much of a gamble

The first company is Playtech (LSE:PTECH). It’s the world’s largest supplier of online gaming and sports betting software. Over the past year, the stock has fallen by 26%, pushing the P/E ratio down to 8.87.

I think the business is in a great place right now and has managed to buck the weaker industry trend of betting demand in the UK this year. This was shown by the comment in the H1 2023 report that the firm had “delivered our highest ever Adjusted EBITDA in the first half of 2023.”

One element that is helping Playtech to ride out weakness in some markets is the diversified operations it has throughout Europe and America. The US is an area of high growth right now and Playtech is taking full advantage. Revenue for this region in H1 2023 was up 43% versus the same period last year.

At the same time, the P/E ratio indicates to me that this stock is cheap. I think investors are shying away from it due to concerns about the UK gambling market. Further, an ongoing legal dispute with a Mexican business isn’t giving the firm good public relations. These are potential risks going forward. But I still believe too much pessimism is factored in to the current share price.

Ready for the next bull market?

Next up is Plus500 (LSE:PLUS). The FTSE 250 stock is one of the largest retail trading and investing platforms in the world, serving many different markets around the globe.

The P/E ratio sits at just 4.55, with the stock down 23% over the past year. Interestingly, back in 2015 Playtech tried to buy Plus500, but it never got regulatory approval.

The business has struggled over the past year in part due to the unpredictability of financial markets. Concerns around stock and bond markets have made some retail customers decide to simply sit on their hands and do nothing.

Therefore, it doesn’t surprise me much that profit before tax for H1 2023 was $174.9m, versus $312.6m from H1 2022. The risk is that this poor run continues.

This has made the stock cheap, in my opinion. Investor sentiment should return at some point, especially when interest rates begin to fall and a future stock market bull run starts.

Due to acquisitions (such as in Japan) over the past year, when the next market rally happens Plus500 should be very well placed to grow revenue. I think investors should consider adding both companies to their portfolios.

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