I wonder if 2 April will go down in investing folklore? It’s the day President Trump revealed his sweeping import tariffs. And it kicked off a share price rout the following day that made a lot of our favourite dividend shares look even more tempting.
I say rout, as that’s what the headlines suggest. The FTSE 100 is down 115 points at the time of writing, about 1.3%. And it’s still up 7% over 12 months.
10% dividend yield
Some big dividend shares fell harder, with Phoenix Group Holdings (LSE: PHNX) losing 4.9% as I write. But that helped push the forecast dividend yield, previously at 9.5%, to 10%.
Phoenix acquires and manages closed life assurance and pension funds. And it operates mostly in the UK. I don’t see how US import duties are likely to affect that business or the ability to pay dividends.
Still, anything that shakes the stock market tends to impact the financial sector. Banks and insurance stocks across the board have lost ground.
Anything new?
Investors thinking of buying Phoenix Group shares face risk. After all, no potential 10% return is going to be close to risk-free.
The biggest danger might be that the company really needs to keep finding new closed businesses to acquire and manage if it’s to grow. Or alternatively, maybe it could move into still-active businesses. The weak five-year share price performance shows investors have concerns.
However Phoenix moves forward, CEO Andy Briggs was still confident at FY 2024 results time in March. He spoke of growth momentum, cash generation, and “sustaining our progressive dividend for shareholders“.
I really don’t see how anything has changed.
Big faller
Mondi (LSE: MNDI) was another of the FTSE 100’s biggest fallers on the day after tariff day. As I write, it’s down 6.7%. But again that boosted the forecast dividend, this time from 5.0% to 5.3%.
At least with Mondi, its business is in some way related to import and export. At least, it makes paper and packaging products. And if international trade falls, maybe it’ll sell less.
The share price has had a tough few years too, now down close to a 10-year low.
Bullish analysts
Against the negatives, broker forecasts are upbeat. We’re looking at a forecast price-to-earnings ratio of around 10 over the next few years, which seems modest for a 5.3% dividend. Debt is predicted to rise sharply in 2025, which is a worry. But that’s expected to be the peak, followed by a decline.
The City folk still see the dividend growing progressively after 2025. That, however, is after a slight dip on the cards for the current year.
Still, despite the market’s apparent bearish take on the packaging business, at FY time in February CEO Andrew King said “we are currently seeing improving order books across our packaging businesses and are implementing price increases across our range of packaging paper grades“.
For anyone considering either of these two stocks (which includes me), I really don’t think much has changed. Except they’re cheaper now.
