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The London Inventory Change is full of loads of profitable alternatives to unlock a second revenue stream. And one which at present stands out among the many FTSE 250 is Victrex (LSE:VCT), providing an unlimited 8.6% dividend yield. That’s nearly thrice the three.3% payout provided by the FTSE 250. And by spending simply over £5,700, buyers can snap up 840 shares, including £500 to their passive revenue.
The query now turns into, is Victrex a great funding? Or is it a lure that might destroy wealth as an alternative of making it?
Investigating the chance
Let’s begin by digging into a few of the issues Victrex at present faces. An enormous cause why the corporate’s providing such a excessive payout is because of the share worth tumbling 35% for the reason that begin of 2025.
Victrex has been struggling by means of a couple of operational setbacks these days. Polymer manufacturing volumes have firmly underperformed expectations, notably in China, the place its new manufacturing facility is now solely anticipated to supply 50 tonnes of fabric versus the unique goal of 200 tonnes.
On the similar time, whereas the corporate has efficiently attracted new clients to its enterprise, not many of those have been after the group’s premium product choices. Subsequently, the group’s common promoting worth has suffered, and revenue margins are experiencing larger stress, finally leading to revenue warnings and institutional investor downgrades.
Pairing all this with mounting world commerce tensions and geopolitical dangers that might disrupt provide chains, it’s not shocking to see buyers develop extra cautious.
Nevertheless, with the weak sentiment now seemingly already baked into its share worth, may the inventory secretly be a discount?
The optimist’s case
Whereas Victrex is undoubtedly coping with a difficult surroundings, there are nonetheless some encouraging indicators of long-term potential. The agency operates in a comparatively distinctive area of interest with comparatively low ranges of competitors regardless of the important nature of its polymer merchandise. In spite of everything, they’re used throughout the aerospace, healthcare, electronics, and vitality industries.
The preliminary launch of its new China facility has actually been underwhelming. Nevertheless it’s nonetheless anticipated to ship a 15% saving to manufacturing prices, permitting administration to cut back the stress on profitability even amongst its non-premium choices.
As such, the newest analyst forecasts challenge that earnings ought to rebound in 2026, supplied no extra spanners are thrown into the works. And mixing this upcoming anticipated restoration with a weakened share worth may open the door to profitable dividends and capital good points over the subsequent 12-24 months.
The underside line
All issues thought-about, Victrex seems to be a high-risk, high-reward funding story in 2025. If administration can restore revenue margins and demand from each healthcare and aerospace clients is restored, shopping for shares in the present day could possibly be profitable in the long term. Nevertheless, the corporate has made fairly a couple of stumbles of late. So I’m personally holding it on my watchlist for now. If the group can present extra encouraging indicators {that a} turnaround is underneath means, then taking a better look could possibly be warranted.
