This 10.6% yielder beats every dividend share on the FTSE 100. Can it last?

Harvey Jones couldn’t resist the double-digit yield on offer from this FTSE 100 stock. Now he’d like to get some share price growth, too.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young black man looking at phone while on the London Overground

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Just because a dividend share comes with a mind-bogglingly high yield doesn’t automatically make it a top income stock. Often, the reverse is true.

Many see an ultra-high yield as a warning signal. Especially when it hits double digits. But I’m betting that FTSE 100 insurer Phoenix Group Holdings (LSE: PHNX) is an exception.

I bought the stock both in January and March because I felt its dividends were probably sustainable. I can’t say that for sure, though.

Should you invest £1,000 in Scs Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Scs Group Plc made the list?

See the 6 stocks

Sky-high income

City analysts seem positive. Today, Phoenix has a trailing yield of a staggering 10.94%, but that’s just the start. It’s forecast to yield 11.2% in 2024, rising to 11.5% in 2025. One way of checking whether a yield is sustainable is by looking at recent dividend per share growth. Here’s what the charts say.


Created with TradingView

In 2019, Phoenix increase its dividend per share by 1.74% to 46.8p. It then increased payouts in each of the subsequent four years. In the last three, the percentage increases were notably higher at 2.95%, 3.89%, and 3.64%.

So rather than nervously trimming payments, management has been increasing them at a faster pace.

Investors need some reward for holding the stock, and so far it hasn’t come in the shape of share price growth. The Phoenix share price is down 12.6% over the last year, and 30.66% over five years.

Created with Highcharts 11.4.3Phoenix Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Yet the board couldn’t increase payments if it wasn’t generating enough cash. And the good news is that it is. Again, here’s what the charts say.


Chart by TradingView

In 2019, cash flows fell 1.92%. They have climbed and at an accelerating pace, rising 1.49% in 2023.

Cash flows look strong

In fact, last year was a bumper year for Phoenix. It was targeting £1.8bn of cash. It smashed that with £2bn. It boasts a solid balance sheet, too, with a Solvency II capital ratio of 176%. That’s near the upper end of its 140% to 180% target range.

Analysts are optimistic, predicting that 2023’s dividend per share of 52.65p will climb to 54.3p in 2024, 56.1p in 2025, and 57.5p in 2026. I’m feeling a little bit happier about my share purchase now.

Phoenix could get a re-rating when the Bank of England finally starts cutting interest rates. This will hit savings rates and bond yields, and make its dividend look even more attractive.

I cannot live by dividends alone. At some point, I’d like to get some share price growth too, but here the outlook is a bit more uncertain.

JPMorgan has just trimmed its Phoenix share price target from £5.25 to £5. Today, the shares trades at 4.81p. Not much scope for growth there.

For now, I’ll console myself with the income. I’ll reinvest every penny I receive to buy more Phoenix shares, and hope that one day the market comes to my point of view, and the share takes off. Fingers crossed!

Should you invest £1,000 in Scs Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Scs Group Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Phoenix Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »