M&G (LSE: MNG) is a UK-focused asset management sub-company of insurer Prudential, which was separated last year. Since the downturn in the FTSE 100 in March, this dividend stock has gained 85% in its share price. Below, I discuss why this stock is still a lucrative long-term investment for any dividend stock investor.
Dividend stocks under pressure
Many large corporations are anxious about paying out dividends until the outlook for the global economy becomes clearer. However, there are still some dividend stocks in the FTSE 100 that can still afford to pay out high yields sustainably. M&G fits into this category.
M&G’s dividend yield currently stands at 7%, placing it in the top 25% of dividend stock payers in the FTSE 100. The dividend payments M&G is providing are also well covered by the earnings generated per share, suggesting that the company has plenty of earnings to spare after paying out its dividend. This adds a sense of security to investors in the knowledge that M&G can continue to provide its current yield securely. Additionally, analysts forecast the dividend of the stock to get back to previous levels of 10% by the end of 2020.
Don’t put all your eggs in one basket
Undoubtedly, to predict the outlook of this dividend stock is relatively challenging. The current volatility in the stock market will continue in the short-term as the global economy struggles to get to grips with the coronavirus. In addition, the stock only recently started trading in the FTSE 100 last year, which raises questions as to how stable the company is going to be for the future, as making judgements on the stability of a company can always be risky especially when it has been newly listed in the stock market.
Nevertheless, M&G has not been placing all its eggs in one basket. The asset managers have been diversifying by branching out into the wealth management sector, as recently shown by having acquired the Ascentric platform from Royal London. The purchase brings £14bn of assets under management, as well as advisors and revenue to M&G from alternative sources. The purchase will help to accelerate the ability of M&G to provide a wider range of investment solutions to more customers, through the service offer they favour.
M&G has shown to be a solid dividend stock which can manage to provide a dividend yield of 7% while having plenty of earnings to spare. Additionally, the stock seems to be in a solid financial position, prepared for growth via acquisitions. The stock is currently trading at a 30% discount due to the stock market crash and I reckon this share will continue to provide a market-beating dividend yield all while showcasing a solid financial position.
