M&G (LSE: MNG) might just be my favourite high-yield FTSE 100 dividend share. I’ve done pretty well since loading up on the wealth manager in July, September and November 2023.
My trading account shows a capital return of about 30%. Not exactly stellar, but certainly not bad for a traditional blue-chip. Once I add in the dividends, all reinvested, my total return tops 56%. Not bad for a supposedly steady-as-she-goes stock, albeit one with a monster yield.
At one point, the income was nudging 10%. Today, it’s a still-generous 7.75%. The dividend hasn’t been cut, it’s just that the share price has risen.
Lately, big FTSE 100 financials have edged back into favour, as investors rediscover the value of strong cash flows and high dividend income.
M&G profits fall, payouts rise
That renewed interest helped M&G shares climb again after its full-year results landed on 19 March. The group posted a reported loss before tax of £347m, compared to a £309m profit in 2023. That was largely due to accounting losses tied to interest rate hedging and annuity portfolio movements.
Strip out those swings and adjusted operating profit before tax actually rose 5% to £837m, driven by a 19% jump in asset management profits. That beat market expectations.
The total 2024 dividend per share was hiked to 20.1p, up from 19.7p the year before. That’s a modest 2% increase and future growth is set to continue at a similarly stately pace. Given the high yield I can live with that.
M&G got another boost on 30 May, when Japan’s Dai-ichi Life took a 15% stake in a move that’s expected to generate at least $6bn in new business over five years.
Income and growth
It’s been five years since M&G was spun off from Prudential. After a bumpy start, the shares have gained 22% in the last year and 60% over five. That’s a tidy lift, but the real star has been the dividends.
Back in 2019, the stock traded at around 170p. Ten grand would have bought 5,882 shares. Over five years, the total payout has added up to 95.93p per share. Those 5,882 shares would have delivered a handsome £5,642 in income.
So a £10,000 investment would now be worth £16,000 in share value, plus the £5,642 in dividends. Total return: £21,642. If those dividends were reinvested, the gains would be even bigger, thanks to compound returns.
However, it’s important to remember that dividends aren’t guaranteed, nor is share price growth. Another bout of stock market volatility could quickly knock the share price back.
FTSE 100 stock slowdown
Forecasts suggest growth might be slower from here. The median 12-month price target sits at 259.4p, a fraction below today’s 260.6p. But I should still get my dividends. The forecast yield is 8.02% this year, rising to 8.32% in 2026.
In the long run, M&G needs to keep building assets and generating capital to sustain its generous payouts. But for now, every time the dividend lands in my account, it gives my portfolio a proper lift.
My holding’s grown large enough that I’m not adding any more. But for those with less exposure, I still think M&G’s still one to consider. The shares may slow but, with luck, the income should keep rolling along.
