I’ve bought a whole bunch of FTSE 100 dividend stocks in recent months, with the aim of generating a juicy passive income for my retirement.
I have particularly high hopes for wealth manager M&G (LSE: MNG), which I’ve bought on three occasions since the summer. I invested my first £2k on 12 July, which bought me 1,063 shares at 187.1p each. At the time they were yielding around 10%.
Top dividend stock
I bought another 1,023 shares on 8 September and 942 more on 30 November. On 7 November I received my first dividend of £133.93, and that bought me 65 more shares.
I now own a grand total of 3,093 shares at a book cost of £6,131.57. So far, they’re up 11.53% in total to £6,838.62, giving me a £707.05 paper gain with the dividend. Which isn’t bad for the first six months but these are early days.
But I’m not looking to bank a quick gain here. I hope that M&G will sit happily in my portfolio for years or even decades, pumping out the dividends and give me the odd burst of share price growth along the way.
M&G has been hit by repeated bouts of stock market volatility since spinning off from Prudential in October 2019 (as have other FTSE 100 financials). That’s hit customer inflows and net assets under management.
Yet this September it posted better-than-expected interim results with adjusted operating profits up more than 30% to £390m. The board was able to boast about “maintaining our financial strength through capital discipline”, and has been working hard to simplify the business and boost client outcomes.
Better still, it’s on track to meet its 2024 operating capital generation target of £2.5bn and 2025 looks promising on that score too. Its 6.5p interim dividend per share was paid in line with estimates.
High income prospects
Dividends are never guaranteed, especially when they’re this high, but M&G is generating cash and markets reckon it will yield 9.21% in 2023 and 9.45% in 2024. I’m looking forward to those payments hitting my account. I’ll be getting around of £600 a year in income alone.
I don’t expect to retire for another 15 years, and I’ll keep reinvesting all my dividends until then. If the yield holds at around 9% and the share grows by a modest 3% a year, I’ll enjoy average a total average return of 12% a year on my £6,838.62.
That would boost it to £37,432 when I start taking my passive income around 2038. If the yield is still 9% at that point and I take all my dividends, it would give me income of £3,369 a year, or £281 a month. Not bad from an initial investment of just over £6,000 (although inflation will have eroded its real terms spending power).
Obviously, I’m counting quite a few chickens here. M&G’s dividend may not be sustainable. The group could be taken over. It could even go bust. That’s why I’m building a portfolio of around 15 FTSE 100 shocks, to spread the risk. With luck, I’ll have a lot of passive income heading my way by the time I retire, and not just from M&G. But my hopes here are high.
