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The FTSE 250 hasn’t delivered much excitement over the past 12 months. Despite a few brief rallies, the index is up just 5.7% since mid-June last year. But under the surface, there are still plenty of dividend shares quietly doing the heavy lifting for long-term income investors.
With an average yield of around 3.5%, the FTSE 250 remains a solid hunting ground for passive income. The trick is knowing where to find value, especially in sectors hit hardest by the current economic cycle.
Retail, in particular, has struggled. Persistently high interest interest rates have weighed on consumer confidence and spending habits. Tightened household budgets and elevated mortgage costs have put pressure on discretionary spending, costing many high-street brands. However, with inflation finally easing and rate cuts back on the agenda for later this year (or early 2026), this could mark a turning point for the sector.
That’s where income investors may find real value — in temporarily beaten-down retail stocks that continue to offer generous dividends.
One name that stands out right now is B&M European Value Retail (LSE: BME). After a sharp 43% fall over the past year, the stock is now trading at an attractive valuation while having boosted its dividend yield to 11.5% this year.
A closer look at B&M
For those unfamiliar with it, B&M operates a value retail chain with over 700 stores across the UK and a growing presence in France. It focuses on low-cost everyday essentials, which has helped it attract budget-conscious shoppers even during downturns.
Despite sector-wide headwinds, it has continued to generate strong cash flows and remain profitable. Its latest full-year results showed revenue rising to £5.5bn, with pre-tax profit coming in at £436m — not bad for a company that’s supposedly out of favour with the market.
The company’s commitment to rewarding shareholders is another major attraction. Its dividend policy remains generous, supported by strong cash flow and a solid balance sheet. The current dividend yield of 11.5% includes a special dividend payout — which won’t be guaranteed every year — but even the regular dividend yield of around 6% offers an income stream well above the FTSE 250 average.
Another key figure worth noting is B&M’s price-to-earnings (P/E) ratio of just 8.27. That’s well below the sector average and suggests the market may be undervaluing its long-term growth potential, especially if consumer confidence returns as interest rates fall.
An opportunity to consider?
Of course, no investment is without risk. While B&M’s value-focused model should help it weather economic downturns better than most, it’s still exposed to fluctuations in consumer sentiment. Any delay in interest rate cuts could dampen growth expectations further.
Additionally, the recent departure of long-serving CEO Simon Arora — who was instrumental in the company’s expansion — leaves some uncertainty around its future strategic direction.
Still, for investors seeking undervalued dividend shares with high yields and solid fundamentals, B&M European Value Retail looks to me like an opportunity worth considering.
With strong earnings, disciplined capital management and a focus on value retail, this could be one of the more attractive plays in the FTSE 250 right now — particularly as macroeconomic conditions begin to turn.
