The London Stock Exchange continues to be jam-packed with hundreds of income shares to pick from. And even with stock prices reaching record highs this year, there continue to be many high-yield opportunities to explore.
In the FTSE 100 alone, more than 30 companies offer a yield of at least 4%. And among the most generous payouts sit M&G (LSE:MNG) and Mondi (LSE:MNDI) with annual dividends at 7.35% and 6.89%, respectively.
That means if someone splits a £10,000 investment equally across both companies, they could unlock just over £700 in annual passive income. Of course, that’s assuming dividends aren’t later cut – a risk that many high-yield income shares tend to carry.
So, are the payouts from M&G and Mondi ‘safe’ from this risk? And are these stocks worth considering as long-term investments? Let’s find out.
Insurance and packaging
Mondi and M&G are very different businesses. The first is an international sustainable packaging manufacturer, while the latter is an insurance and asset management giant. Yet they share a similar key trait: both are highly cash generative.
Even with cyclical headwinds in packaging demand from the industrial sector, Mondi’s cash profits have remained resilient and relatively stable compared to a year ago.
Considering the market backdrop the firm is operating in, while not terrific, its performance remains robust. And with management diversifying into the European e-commerce packaging market, growth could start to emerge next year. As such, even with a high yield, dividends have been maintained.
M&G is in a similar financial position, where growth isn’t spectacular, but underlying cash generation remains strong, funding an impressive payout.
But if both dividends look sustainable, why aren’t more investors capitalising on these income shares?
Where’s the risk?
As previously mentioned, Mondi is busy diversifying its revenue stream to benefit from the continued rise of online shopping logistics. However, even with good progress so far, this remains a small fraction of overall cash flows.
Right now, the bulk of demand continues to stem from European industrial manufacturers. And this sector is currently in the middle of a few challenges. A softer manufacturing environment, an oversupply of paper packaging, and a shift to just-in-time inventory models are dragging down the price of packaging materials.
M&G’s situation is a bit more complex. Despite its asset management arm seeing a resurgence in demand, de-risking activity with the UK defined benefit pension market is causing massive amounts of capital migration. And consequently, £5.1bn of client funds flowed out of M&G’s pockets during the first six months of 2025.
Overall, the group’s net client flows improved versus 2024. But nevertheless, £2.5bn left M&G’s ecosystem, reducing the group’s fee-earning opportunities.
Where does that leave investors?
Both Mondi and M&G are facing cyclical shifts in their respective markets. And with M&G’s accounting being significantly more complicated, it’s not surprising to see a higher yield on offer.
However, personally, I’m currently not tempted by these yields. While the underlying fundamentals look solid enough, both Mondi and M&G are somewhat at the mercy of their respective cycles.
While both will eventually recover, there’s a big question mark on the exact timing of these events. And if market conditions worsen, a dividend cut might rear its ugly head. So instead, I’m looking at other passive income shares for my portfolio.
