M&G shares: here are 5 things you need to know

Thinking about investing in M&G (LON: MNG) after it demerged from Prudential (LON: PRU)? Here’s what you need to know.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Last Monday, Prudential and M&G (LSE: MNG) completed their demerger. As a result, M&G now trades on the London Stock Exchange as a member of the FTSE 100. With that in mind, here are five things you should know about the newly-listed company.

The business

Firstly, let’s take a closer look at the business. Essentially, M&G is a savings and investment company whose main goal is to grow its customers’ wealth. Operating in 28 markets, the group serves around 5.5m retail customers and over 800 institutional clients, and at 30 June it had assets under management of £341m. Currently, the company has a market capitalisation of £5.7bn.

Future growth prospects

Looking at company literature and announcements, management appears to be quite confident about the future. For example, on the company’s website, it says: “M&G plc is ideally positioned to capture growth opportunities in an attractive savings and investments market” and “M&G plc will bring a new and differentiated growth story to the savings and investments market.”

And on the day of the demerger, CEO John Foley added: “Independence and our unique business mix mean we are well-positioned to benefit from long-term economic and social trends that offer growth opportunities for many years to come.” Clearly, the company sees growth opportunities ahead.

Insider activity

What I think is particularly interesting here is management is putting its money where its mouth is, so to speak. Since the demerger, the following directors have purchased M&G shares:

  • CEO John Foley: 100,000 shares

  • Chairman Mike Evans: 32,000 shares

  • CFO Clare Bousfield: 14,000 shares

  • CIO Jonathan Daniels: 100,000 shares

  • Independent Director Clive Adamson: 4,600 shares

I see this insider transaction activity as a bullish signal. It suggests these directors are confident about the future and see MNG shares as undervalued.

Valuation

Speaking of valuation, it’s probably still a little too early to get an accurate read on the stock’s P/E ratio. Currently, analysts have an earnings figure of 38.1p per share pencilled in for this year, which puts the stock on a low P/E of 5.7.

However, I’d expect that forecast to fluctuate in the near term as more analysts begin covering the stock. Interestingly, JP Morgan has commenced coverage of the stock with an ‘overweight’ rating. It has a price target of 271p – 25% higher than the current share price. 

Dividend yield

Finally, turning to the dividend, the group said in a recent report it expects to pay out £465m in dividends for the full year. Now, given that there are 2.6bn shares in issue, that means a dividend of around 17.89p per share. At the current share price, that equates to a prospective yield of a high 8.3%, meaning M&G could potentially be a cash cow. Remember that dividends are not guaranteed though.

All things considered, I think M&G shares look quite interesting right now. The dividend yield is attractive and I like the fact its directors are buying shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Prudential and M&G. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »