The FTSE 100 is home to some of the UK’s largest companies and a treasure trove of high-yielding dividend stocks. These stocks promise a consistent and reliable cash flow from regular dividend payments, making them attractive to income-focused investors.
Two leading FTSE firms, Phoenix Group (LSE: PHNX) and M&G (LSE: MNG), are currently offering the highest yields. That suggests they could be top choices to consider for those seeking passive income. But the yield alone can be deceiving as it doesn’t tell the full story.
Recent developments, earnings and forecasts may help build a better picture of where they’re headed.
Phoenix Group
Phoenix is a life insurance and pensions provider, with subsidiaries including SunLife and Standard Life.
It currently boasts the highest yield on the FTSE 100 at 10.4%. Having remained around 10% for over two years, it isn’t the result of a sudden price dip. It’s grown at an annual rate of 2.8% for the past decade.
Like many insurance companies still struggling to recover from the pandemic, it’s unprofitable and the price is down 32.4%. However, the past year has seen some growth.
Value investors may consider an opportunity there but recovery could be slow. Analysts are cautious, with the average 12-month price target expecting only a 12.4% gain. Dividend-wise, mild growth is expected this year, for a yield of 10.9% that could climb further to 11.2% in 2026.
Falling inflation has helped the company regain a foothold but there’s a risk inflation could rise again. That could be problematic as the firm is already struggling with £5.41bn in debt — more than its entire market cap.
As a shareholder, I hope it recovers but it may be a long road ahead. If I were considering the stock now, I’d wait until the next earnings call before making a decision.
M&G
M&G is an investment management firm that was formed when it demerged from Prudential in 2019. However, it has existed in one shape or another since 1931.
It has the second-highest yield on the FTSE 100 at 9.9%, which has held steady between 8% and 10% for the past five years. During that time, the annual dividend has risen from 12p per share to almost 20p.
The share price is still down since pre-Covid but has recovered almost 90% from its all-time low in late 2020. Weak results in March last year (2024) stalled growth, sending the price tumbling 16%.
Things may have improved since but only the next full-year results will tell. If they also fail to impress, the share price could take another dip.
As such, analysts are cautious. Their average 12-month price target is a meagre 11.55% increase from today’s price. Still, dividends are expected to grow to 20.6p this year and 21.3p in 2026. That could push the yield above 10%.
With less debt and a more promising outlook, M&G appears to be in a slightly better position than Phoenix. Investors aiming for dividend income may want to consider it as the better option of the two.
However, no investment decision should ever be based on a single metric. Many stocks on the FTSE 100 could offer better long-term returns when taking all factors into consideration.
