As a value/dividend/income investor, I’m always searching for undervalued shares in good businesses. And my goal as an older shareholder (I’m 55) is to generate ever-higher passive income.
Happily, there are plenty of high-yielding shares within the FTSE 100 index. Indeed, I count at least 10 Footsie stocks with dividend yields of 8%+ a year.
Passive income from blue-chip businesses
London’s main stock index offers such attractive cash yields partly because it has been weak in 2023. The index has dropped 4.8% in the last six months, leaving it down 0.6% this calendar year.
As a result, the FTSE 100 now offers a cash yield of 4% a year — much higher than the yields from other major stock markets. What’s more, some high-yielding stocks offer juicy passive incomes that have to be seen to be believed.
M&G looks good to me
My wife and I already own six of the 10 highest-yielding FTSE 100 shares, including three of the top four. And one of these dividend stocks is long-established asset manager M&G (LSE: MNG).
At the current share price of 201.9p, this group is valued at under £4.8bn, making it one of the smaller FTSE 100 companies. But this global business has been going since 1931 and today manages almost £333bn of financial assets for million of clients.
What’s more, M&G stock has beaten the Footsie (+3.1%) over the past year, as the table below shows. Here’s how its share price has changed over six different periods:
| Five days | +4.2% |
| One month | +4.6% |
| Six months | -1.1% |
| 2023 to date | +7.6% |
| One year | +16.4% |
| Since flotation (at 220p) | -8.2% |
After some summer weakness, M&G shares have rebounded over the past month, rising almost 5%. And though they have risen by almost a sixth over one year, they have lost value since being floated in October 2019.
I own M&G for bumper income
The above figures exclude cash dividends, which are magnificent from M&G. That’s why my wife and I bought this cheap stock in August for 199.6p a share. Here are M&G’s dividends since its IPO (initial public offering) over four years ago:
| Year | Total dividend |
| 2023 | 6.5p* |
| 2022 | 19.6p |
| 2021 | 18.3p |
| 2020 | 18.23p |
| 2019 | 15.77p |
Note that even during Covid-ravaged 2020, M&G raised its dividend by 15.6% over 2019. Likewise, the 2022 payout was up 7.1% on 2021’s distribution.
Passive income of £1,972 for life?
Right now, this stock offers a dividend yield of 9.86% a year. Were I to buy £20,000 of these shares at the current share price, I’d have 9,906 shares (excluding charges). These shares would pay me £1,972 a year in passive income. What’s not to like?
Now for the negatives. Future dividends are not guaranteed, so they can be cut or cancelled at any time. That said, M&G has plenty of spare capital on its balance sheet to keep paying dividends.
Also, this group’s future is closely linked to the health of financial markets. Therefore, if stocks and bonds crash — as they did in 2022 — then M&G’s earnings might be hit hard. But the only reason I haven’t bought this stock this month is that we already bought it cheaply!
