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Despite being mainly known for growth stocks, the FTSE 250 has an abundance of high-yield dividend opportunities. In fact, there are currently more than 40 firms with a payout of 6%+. And among these is Victrex (LSE:VCT), a speciality materials enterprise.
Victrex shares have had a bit of a rough time lately. The stock’s down roughly 23% over the last 12 months due to a combination of operational and market challenges.
Yet despite these speed bumps, dividends have continued to flow into shareholders’ pockets.
As such, anyone with £12,307 sitting on the sidelines can currently buy 1,679 Victrex shares, unlocking a £1,000 passive income in the process. Considering a FTSE 250 index fund would only generate £418 for the same capital investment, Victrex shares and their 8.1% yield are looking undeniably tempting.
So should investors consider adding this business to their passive income portfolios right now?
What’s going on with Victrex?
Let’s start by looking at the main problems Victrex has been encountering. It’s PEEK polymer materials are used in a variety of industries, including healthcare, industrials, and aerospace, among others. Yet with less-than-ideal global economic conditions, demand has suffered.
To management’s credit, Victrex has managed to maintain resilient polymer volumes that have started to recover. But with continued soft conditions from its leading medical customers, the group has ended up with a less favourable product mix. Combining this with lower prices, revenue growth has proven challenging, while profit margins are feeling the pressure.
These headwinds have only been compounded by the unexpected issues at its newly-constructed China manufacturing plant. Unforeseen operational challenges led to a significant downward revisal of early production forecasts. And with investors already on edge, CEO Jakob Sigurdsson announced his plans to step down as CEO earlier this year.
What’s next?
These developments don’t exactly point towards a thriving business. Yet analyst consensus is slowly turning bullish. Victrex is looking increasingly like a cyclical recovery play.
As previously mentioned, polymer volumes have already started showing signs of recovery. And with several pipeline projects nearing completion, this upward trajectory is expected to accelerate in 2026. At the same time, the problems in China are getting resolved with operational improvements being executed.
High-margin medical demand remains soft with no clarity as to when conditions in this sector will improve. And macroeconomic uncertainties could make it harder for earnings to rebound. Nevertheless, Victrex appears to be confident about what’s on the horizon, given that it has maintained dividends despite these challenges.
The bottom line
All things considered, Victrex appears to be in a tough but not impossible spot. The outlook seems to be improving. Yet, further operational disruption could indeed lead to a dividend cut. And this risk is seemingly why the yield remains high despite management’s confidence.
Personally, the risk is still a bit too high for my tastes. But this FTSE 250 stock is definitely on my watchlist. If it can continue to show signs of recovery, investors may want to start taking a closer look.
