Standard Life (LSE: SDLF) is a brilliant UK stock for income-focused investors to consider, with a stunning trailing yield of 7.78%. Only one FTSE 100 share pays more. Fellow insurer Legal & General Group, which yields 8.55%.
Standard Life has delivered something that Legal & General has struggled to do. Share price growth. The Standard Life share price is up almost 25% in the last year (and was doing even better before the Iran war hit markets). By contrast, Legal & General Group is up just 5% over 12 months.
I hold both stocks in my SIPP, but Standard Life, which recently rebranded from Phoenix Life, has been the more rewarding. And I’ve just noticed that its shares go ex-dividend on Thursday (9 April). Any investor who wants to share in the final 2025 payout needs to buy it before then. Should they go for it?
FTSE 100 high yielder
Right now, buying any stock is nerve-wracking, as we await events in the Middle East. That’s why at The Motley Fool we always advise buying shares with a minimum five-year holding period. That allows the market to shrug off short-term shocks, while giving the share price and reinvested dividends time to compound and grow.
Investors must always approach high yielders like this one with caution, as shareholder payouts could prove unsustainable. Yet Standard Life has a solid track record of increasing dividends, lifiting shareholder payouts every year for a decade. Growth has been modest, at an annual compound rate of 3.18%, but that suggests it’s taking a measured approach. Future dividend growth is expected to slow to around 2% a year.
Standard Life operates in a competitive market and has to continually source new business to keep the revenue flowing and the dividends secure. It’s identified a new growth opportunity in pension risk transfers, although plenty of insurers are chasing the same business. If the Iran conflict intensifies, Standard Life could get swept up in a stock market crash, which would hit the value of the £280bn of assets it holds to protect against insurance liabilities.
Solid FTSE 100 stock
With a forward price-to-earnings ratio of just over 16, the shares are decent value. The forward yield is 8.1%. If an investor decided to put their full £20,000 Stocks and Shares Isa allowance in Standard Life, they could look forward to income of £1,620 over the next year.
To bag the 2025 final dividend, they’ll need to move quickly. It’s worth 28.05p for each share bought. Today, the shares trade at 712p. So £20k would buy 2,808 shares. These would produce a dividend of £778 on 20 May. An interim payout will follow in October. It’s worth pointing out that the shares are likely to fall on 9 April to reflect the lost value after paying that dividend.
Only an experienced investor with a large portfolio should put their full ISA in a single stock. As with every purchase, investors should spread their risk and take a long-term view. But I think Standard Life is well worth considering today.
