A handful of FTSE 100 stocks offer dividend yields to die for. And you know what? They get me every time.
I hold housebuilder Taylor Wimpey, which has a trailing yield of 9.1%. I also hold Phoenix Group Holdings (which yields 7.96%) and Legal & General Group (8.89%).
But my favourite ultra-high-yielder is wealth manager M&G (LSE: MNG). It hasn’t just handed me bags of income since I bought it a couple of years ago, but capital growth too. M&G shares are up 30% in a year, and almost 60% over five.
The share price is a killer too
All dividends are on top of that. So investors looking at the performance tables may not realise just how well M&G has done on a total return basis.
As everyone knows, a high yield can also be a sign of risk. So is the payout sustainable?
M&G floated in 2019, after being peeled off from insurer Prudential. Since then, dividend growth has been sluggish. In 2021, it increased the total dividend per share by just 0.38% to 18.3p. Investors got a 7.1% increase in 2022 to 19.6p, but just 0.51% in 2023 and 2.03% last year. That lifted the full-year 2024 dividend per share to 20.1p.
It’s hard to complain, given the stonking yield. Also, the board has said it will maintain a “progressive dividend policy”, hiking by around 2% a year in future. That’s less than inflation, which was 3.8% in August, but not bad.
Shareholder payouts look well supported. At the end of last year, M&G’s key Shareholder Solvency II coverage ratio was a handsome 223%. In the first half of 2025, it nudged up to 230%, and that was after funding the May dividend.
It also generated £408m of operating capital generation, a number the board described as “strong”. That was down from £486m in the first half of 2024, but an 11% increase to £331m on an underlying basis. Operating profits climbed too, if only by £3m to £378m.
Stock market crash alert
Of course, there are risks. There have been a blizzard of warnings about a potential stock market crash. That would hit the value of M&G’s assets under management and may squeeze net customer inflows.
As an active manager, M&G also has to survive the shift to cheap, passive index tracking strategies, as exchange traded funds (ETFs) dominate.
On Monday (13 October), I was intrigued to see broker Berenberg turn its attention to UK life insurers. I was happy to see it upgraded M&G from Hold to Buy. Better late than never!
Berenberg highlighted strong first-half asset management net inflows of £2.6bn and the huge opportunity presented by the fast-growing UK workplace pensions market. It lifted its price target from 225p to 342p.
Higher growth target
Today, the M&G share price is just under 265p. If Berenberg’s forecast is correct – never guaranteed – that would suggest growth of 30% from here. Which I would lap up, along with those juicy dividends.
I think M&G is still well worth considering for income-focused investors. Especially since its strategic partnership with Dai-ichi Life is expected to generate at least $6bn dollars of new business over five years. I have an outsized stake in the stock, but I’m still tempted to buy more myself.
