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The FTSE 250 is full of dividend shares. In fact, as I write in early September, the index is yielding 3.38%. Perhaps surprisingly, this is a tiny bit higher than the 3.36% offered by the FTSE 100.
Some of this differential can be explained by share buybacks. So far in 2025, instead of returning cash directly to shareholders, members of the Footsie have spent £39bn buying their own shares.
Even so, those looking to boost their incomes — with cash in their hands — could consider taking a closer look at some of the highest-yielding FTSE 250 stocks.
A rising yield
One example is Ithaca Energy (LSE:ITH), the North Sea oil and gas producer, which has had a turbulent week.
Its shares fell heavily after its two of its largest shareholders — DKL Energy and Eni UK — announced on 2 September that they had sold 3% of the group to institutional investors at a 10% discount to the prevailing share price.
During the following four days, the share price tanked more than 18%.
For new investors, this means the stock’s yield has increased further. Already one of the best on the index, it’s now offering a return of 12.4%.
However, in its short existence (the group’s only been listed since November 2022) its dividend has proven to be erratic. This is typical of the energy sector where earnings can be volatile.
| Year | Dividends per share (cents) |
|---|---|
| 2023 | 39.63 |
| 2024 | 34.04 |
| 2025 (to 5 September) | 10.10 |
Helping to fix the nation’s finances
Another major problem for the group is that profits made in the North Sea are subject to an effective corporation tax rate of 78%. A windfall tax means the sector’s being heavily squeezed by the government.
The impact of this can be seen from Ithaca’s results for the six months ended 30 June. During this period, the group reported a profit before tax of $513m but its tax charge was an eye-watering $731m. This is a tax rate of 143%.
However, some of the charge includes deferred tax ($292m). This isn’t payable until a later date — possibly many years into the future — even though it’s shown to reduce this year’s post-tax earnings.
Fortunately for income hunters, the group remains cash generative. Although dividends are a distribution of a company’s profit to shareholders, they are paid using cash. So those wanting to understand how secure the group’s dividend is should take a look at its cash-generating potential. During the first six months of 2025, its operating cash flow was $1bn. This helped reduce its net debt by $214m.
And a series of acquisitions means the group’s production was 133% higher compared to the same period in 2024. Ithaca plans to return $500m to shareholders in respect of its 2025 financial year. And due to its “excellent operational performance” it recently announced that it’s going to bring forward the timing of its next two dividend payments.
The industry is lobbying hard to persuade the government to introduce an alternative to the energy profits levy. We will know in November whether the Chancellor is sympathetic. Until then, even with oil and gas prices at relatively low levels, Ithaca Energy appears to be doing well. It could be one for income investors to consider.
