The thrill of owning a top FTSE 100 passive income share never fades. In fact, it only builds and builds. Especially when it pays a crisp £458 straight into my self-invested personal pension (SIPP) with no effort whatsoever on my part.
That’s exactly what happened to me this morning, courtesy of wealth manager M&G (LSE: MNG).
It’s best known for its fabulous yield, which now stands at a bumper 9.23% and is the main reason I own it.
Loving those dividends
I bought the stock on three occasions in 2023, picking up a grand total of 3,028 shares through my own efforts.
Since then, M&G has done all the heavy lifting. Even before today, I received three dividend payouts, and reinvested every one of them. That added 365 shares to my total.
Once my SIPP has automatically reinvested today’s payout, it should add another 210 shares at today’s price of 218p. That lifts my tally to 3,603 shares.
Every new share I buy will go on to pay more dividends, which I’ll automatically reinvest to buy still more stock in what I hope will be a long-term virtuous cycle.
The key word is hope. Nothing is guaranteed with dividends. Companies loathe cutting payouts because it smashes confidence, but they will if they don’t have the cash.
Strong track record
M&G peeled off from FTSE 100 insurer Prudential in 2019, and the income stream has slowly climbed since, as my table shows. It ignores the 2019 payout, which included a special demerger dividend.
| Dividend | 2020 | 2021 | 2022 | 2023 | 2024 |
| Interim | 6p | 6.1p | 6.2p | 6.5p | 6.6p |
| Second interim | 12.23p | 12.2p | 13.4p | 13.2p | 13.5p |
Growth has been slow and bumpy, but the total always climbed, if only by a tenth of penny. The 2024 second interim of 13.5p per share funded today’s £458 payment.
The slow pace of dividend growth has arguably capped the share price. There’s also a frustrating quirk with high-yield stocks. When they go ‘ex-dividend’ (after which anyone buying the shares won’t qualify for the next dividend), the share price tends to fall roughly in line with the total payout. So income investors may have to accept slower capital growth.
Over the past year, M&G is up just 5.8%. Over the two years I’ve owned it, it’s up 6.6%. But add in my reinvested dividends (including today’s), and I’m sitting on a total return of 30%. Not bad in a bumpy market.
A sustainable strategy
A big risk is whether the dividend is sustainable. In 2024 though, operating capital generation came in at £933m, comfortably beating its upgraded target.
The board is now targeting £2.7billion in cumulative capital generation by 2027. That looks solid enough.
But there are challenges. Markets remain volatile. Plans to expand into European private assets add complexity. And with the rise of passive investing, M&G’s traditional active fund model is under pressure.
There’s no way I’m selling though. Especially not after today. I’m sticking to my plan of holding the shares for years, and ploughing back every dividend I get. Today’s payout is just another small step in what I hope is a long and lucrative journey.
