Image source: Getty Images
There are plenty of FTSE 250 shares offering generous dividends at the moment (26 January). In fact, there are over 60 currently yielding more than the rate of interest paid on the UK’s most generous easy access savings account.
One example is Harbour Energy (LSE:HBR), the oil and gas producer. Its stock is presently offering a return over twice that of an interest-earning bank account. But is it a no-brainer buy? Let’s see.
Out of favour
Despite its attractive dividend, I think it’s fair to say that Harbour Energy’s unloved by investors. Last week (22 January), it issued its Q4 2025 trading update. Although it announced an increase of $100m to $1.1bn in its 2025 free cash flow (FCF), the company’s share price fell 7%.
This has helped push the yield on its stock’s higher. But experienced investors know that the generous 9% return currently on offer could be a sign that the group’s dividend will be cut. Indeed, the company recently said that it plans to move to a “payout ratio approach… incorporating a base dividend and share buybacks” to align with its peers.
In other words, it’s likely to pay a dividend equal to a pre-announced percentage of FCF. We’ll know for sure in March, when the group announces its full-year results. Until then, shareholders can only speculate.
However, given that the group’s current dividend is costing $455m — and that it’s expecting lower FCF in 2026 of $600m — I wouldn’t be surprised if it gives shareholders less this year. But a closer look at other UK-listed independent producers shows that, when it comes to yields, Harbour Energy isn’t an outlier.
Nearest and dearest
Energean Oil & Gas has operations in the Mediterranean and the UK. For the past 14 quarters, it’s paid a dividend of $0.30 a share. And it plans to do this throughout 2026. At the moment, its stock’s yielding 9.6%. This fixed payout policy is the opposite of a ratio approach.
By contrast, Ithaca Energy’s dividend has been much more erratic since listing in November 2022. Based on amounts paid over the past 12 months, its yield is 12.9%. The group, which has stakes in six of the UK’s 10 largest fields, has a policy that targets annual dividends of 15%-30% of post-tax net cash from operating activities.
As for Kosmos Energy, it doesn’t currently pay any dividends.
What does this tell us?
It’s clearly a mixed picture. But with earnings in the energy sector being notoriously volatile, future dividends are impossible to predict with any great accuracy.
However, even if Harbour Energy does cut its payout, I think it remains an attractive proposition. I like its strategy of expanding overseas to mitigate the impact of the UK government’s windfall tax. By doing this, it’s been able to reduce its operating costs. And despite energy prices being at relatively low levels, the group’s reduced its net debt by $300m during 2025.
Acknowledging that investing in the sector might not appeal to everyone, I think it’s a stock to consider, even though I suspect the 9% yield won’t be available for much longer. Even if it cuts its payout by 50% in 2026, it would still be yielding more than one of those bank accounts that I mentioned earlier. And what’s not to like about that?
