However, I believe the market has yet to fully reflect this outlook, leaving the valuation looking increasingly disconnected from reality.

So, how compelling an opportunity is this to me now?

Rising earnings growth momentum?

Investment management giant Man Group’s (LSE: EMG) earnings growth is driven by strategic expansion, operational momentum and disciplined capital allocation.

A risk here is any global liquidity squeeze resulting from a prolonged spike in market volatility. It could prompt outflows in assets under management (AUM) and squeeze profit margins.

However, its latest annual results (2024) saw core profit before tax grow 39.1% year on year to $473m (£349m), with performance fees increasing 72.2% to $310m. Core net management fee revenue rose 14% to $1.1bn, while AUM edged higher to $168.6bn.

Man Group’s July 2025 acquisition of US private credit specialist Bardon Hill is also strategically important. It gives it access to one of the fastest-growing, highest‑margin segments in asset management. As such, it should allow the group to improve fee margins and add a more stable, less market-sensitive earnings stream.

Meanwhile, its heavy investment in technology and automation means incremental AUM can be handled at relatively low marginal cost, supporting margin expansion even in volatile markets.

Against this backdrop, the consensus analysts’ forecast is that Man Group’s earnings will grow by 32.7% a year to end-2028.

How undervalued is the stock?

A discounted cash flow (DCF) analysis identifies where shares should trade by ‘discounting’ projected future cash flows back to today. These flows also reflect the consensus analysts’ earnings growth forecast.

Let us assume that the 32.7% a year projection is right, although it is not set in stone. Using a discount rate of 8.5%, my DCF model estimates Man Group is 42% undervalued at its current £2.61 price.

Therefore, its ‘fair value’ could secretly be around £4.50 per share.

This is crucial, as asset prices tend to converge to their ‘fair value’ over time. So, it suggests a potentially terrific buying opportunity to consider, if those analyst forecasts prove accurate.

A rising dividend yield too?

Man Group’s current dividend yield is 4.9%, against the FTSE 250’s 3.5% average. That said, the consensus analysts’ forecast is that this will rise to 5% this year, 5.2% next year, and to 5.6% in 2027. This reflects the fact that yields can alter over time, with share price and annual payout changes.

Nonetheless, a £20,000 investment on a 5.6% average would make £14,968 in dividends after 10 years. This also assumes the dividends will be invested back into the stock, known as ‘dividend compounding’. 

Over 30 years on the same basis this would rise to £86,893. At that point, including the £20,000 original investment, the holding would be worth £106,893. And that would pay investors an annual dividend income of £5,986!

My investment view

I believe Man Group offers a powerful combination of accelerating earnings, a more resilient fee base, and a deeply discounted valuation.

Its scale, growing operating leverage and growing private‑credit exposure give it solid long-term foundations as a serious growth share, in my view.

As such, I will add to my holding in the firm soon and think it well worth other investors’ consideration too.

The post Does this growth share have a 42% valuation gap that the market hasn’t woken up to yet? appeared first on The Motley Fool UK.

However, it doesn’t mean these types of shares don’t exist. Here are two I’ve noted down.

A specialist bank

The first one is Paragon Banking Group (LSE:PAG). The company’s up 18% over the past year and 81% over the past five, ticking the box for a growing enterprise. On the dividend side, it currently has a yield of 5.08%.

The FTSE 250 firm mostly focuses on UK mortgage lending. More specifically, buy-to-let mortgages for landlords and specialist commercial lending for companies. However, it also has a large deposit book, thanks to offering savings accounts to the retail crowd.

It therefore makes money by lending funds at a higher interest rate than it pays on deposits, known as the net interest margin.

Back in December, it released preliminary full-year results showing growth is coming from the loan book, while also keeping a close eye on costs. The CEO also spoke about how digitisation has helped the firm become more efficient. When looking at 2026, he said: “We see plenty of opportunity ahead in our chosen specialist markets”.

The dividend per share rose 8.7% last year, and I don’t see any risk of it being cut any time soon. However, one risk is that given its niche areas of lending, it might struggle to keep growing at the same pace in the future, as the market size is naturally capped.

The investment giant

Another stock is Man Group (LSE:EMG). The global investment management firm has a dividend yield of 5.46%, with the share price up 19% in the last year.

The company has strong momentum right now, thanks to assets under management (AUM) hitting a record high in the latest results from October. Specifically, the firm now manages $213.9bn, up from $193.3bn in the previous quarter. This is important because asset managers charge fees based on the amount of money they manage. So this bodes well for revenue increasing in the coming reporting periods.

Part of what’s attracting investor attention for Man is the expansion of the different funds it’s offering to clients. It’s now pushing new actively managed ETFs, as well as private credit solutions. This diversification of strategies not only helps the company to reduce risk in one area, but also makes it more appealing to outside investors.

On the dividend side, it pays out twice a year, with the amount ticking higher over the past few years. The dividend cover ratio is 1.8, so the earnings per share can almost cover the current divdiend twice over!

One concern is that the stock’s slightly at the mercy of the financial markets. If we get a market crash, the business will underperform, potentially prompting clients to pull their money.

Overall, I think both companies can offer investors the best of both worlds and could be considered as part of a broader portfolio.

The post The best of both worlds? 2 growth stocks with dividend yields above 5% appeared first on The Motley Fool UK.

Anyhow, the best way I have found of making money with little effort is through dividends paid by shares. The higher the better, of course, and the longer they persist even better than that.

Recently I added to my portfolio of such shares, based on three key factors — so what were they?

7%+ annual dividend yield

First, the stock – investment management giant Man Group (LSE: EMG) – has a projected yield of over 7%.

This figure is important to me, as it reflects compensation for the extra risk in investing in shares over no risk at all. And the current ‘risk-free rate’ (10-year UK government bond yield) is 4.6%.

Man Group’s current dividend yield has drifted below this level – to 6.5% — given a surge in share price recently. However, analysts forecast it will rise again this year to 7%, next year to 7.1%, and in 2027 to 7.6%.

This also compares very favourably to the present FTSE 250 average dividend yield of 3.5%. The FTSE 100’s is even lower – at just 3.1%.

So, Man Group passes this test for me.

Undervalued share price

I never sell my passive income stocks if they continue to perform as I think they should. However, if they do not, I would obviously prefer to make a profit if I do sell.

The chances of this happening are greatly improved in my experience if the stock is undervalued when I buy it. This means that there should be as big a gap as possible between its price and its ‘fair value’.

I have found over the years that the discounted cash flow method is the best way of pinpointing this difference.

In Man Group’s case, it shows the stock is 44% undervalued at its current £2.01 price.  Therefore, its fair value is £3.59.

Second test also passed.

Strong earnings growth

Handily for me, both the dividend and share price trajectories of any stock tend to be driven by one thing – earnings growth.

Risks to Man Group’s is a sudden change in global liquidity, interest rates, and/or geopolitical events. These can trigger rapid outflows in assets under margin and compress profit margins.

However, its 17 October Q3 trading statement showed a 22% year-on-year rise in assets under management to a record $213.9bn (£159.7bn).

Moreover, analysts forecast that its earnings will grow by a whopping 36% a year to end-2027.

Third test passed.

My investment view

Another £10,000 investment in the stock by me would generate £11,332 in dividends after 10 years. This is based on reinvesting the dividends back into the stock and a 7.6% average yield.

After 30 years on the same basis, this would rise to £87,066. Including the £10,000 investment, the total value would be £97,066.

And this would deliver a total annual passive income of £7,377.

Given it passed all three tests, I will be adding to my holding in the stock very soon.

I am also looking at several other high-yield shares that have caught my attention recently.

The post To target £7,377 in annual passive income, how much should I invest in this FTSE dividend gem? appeared first on The Motley Fool UK.

Positive momentum

The first one is Man Group (LSE:EMG). Over the past year, the stock’s only up 3%. So some might be puzzled as to why it’s worthy of further research.

The primary reason is that the company has achieved significant growth in assets under management this year, setting new records. As of the end of September, it stood at $213.9bn. This was up $20.6bn from $193.3bn the previous quarter, which in itself was a record.

As a result, this should lift management fees and fee-related earnings if sustained, which will be reflected in quarterly earnings reports early next year. Simply put, the more money the asset manager looks after, the more money it can earn from fees.

I also don’t feel it should suffer a sharp withdrawal of assets even if the market is volatile next year. This is due to its wide range of different strategies. Even if one area or asset class underperforms, it can hopefully offset this by generating gains in another area.

With a price-to-earnings (P/E) ratio of 10.82, it’s below the FTSE 250 average. This leaves room for the share price to rally next year relative to the index without it being perceived as overvalued.

Of course, there are risks. The boost to profitability from the inflows might be offset if costs rise, meaning the overall benefit to the share price could be limited.

A strong track record

A second company worth considering is Diploma (LSE:DPLM). The stock’s easily beaten the FTSE 250 over the past one-, two- and three-year time periods. In the last year, it’s up 21%.

One of the primary factors driving this outperformance is the consistent growth in earnings. Earnings per share continue to rise through organic growth and bolt-on acquisitions. Given that this growth has been maintained for over a decade, I see no reason to suggest it will suddenly stop in the coming year.

Another perk of owning the stock as part of a FTSE 250 portfolio is that it offers good exposure away from the UK. About two-thirds of revenue now comes from North America. There are signs of a rebound for US industrial activity. If this continues, Diploma’s earnings could accelerate faster than the UK-centric FTSE 250 average.

Some will flag the P/E ratio of 56. When I compare it to Man Group, Diploma could indeed be seen as potentially overvalued. This could eventually mean future share price gains are harder to come by. Another risk is currency swings. Given the amount of revenue in US dollars, the volatility in the exchange rates can provide a headache.

Based on company-specific factors, I believe both could outperform the broader index in the coming year and are therefore worthy of further research.

The post 2 FTSE 250 shares that I think could easily beat the index in the coming year appeared first on The Motley Fool UK.

It looks even more of a powerhouse now after the 17 October release of its Q3 trading statement. This showed a 22% year-on-year rise in assets under management (AUM) to a record $213.9bn (£159.7bn). It was also well ahead of market expectations of a rise to $201.7bn.

Of this increase in AUM, $10bn came from its own investment performance. This marked a 177% leap over Q2’s trading performance. A fund manager’s AUM is largely comprised of new client flows plus investment performance.

Since its strong numbers on 17 October, its share price has risen 11%, which has pushed down its dividend yield. This is because any stock’s yield moves in the opposite direction to its share price, given a constant dividend.

I bought the shares recently to be a key part of my passive income portfolio. This is income generated with minimal effort from me.

Consequently, a stock price rise is not especially useful to me. I could only realise it if I sold the stock, which would be a one-off benefit. I would rather have years of regular higher income from dividends from it.

So, is the dividend headed higher again?  

Underpinning any long-term rise in any firm’s dividends (and share price, for that matter) is earnings growth.

Basically, increased earnings provide a greater pool of cash to firms to pass on to their shareholders.

A risk to Man’s earnings is not increased volatility in the markets, as some investors may think. Greater volatility allows for greater profits if a firm’s traders know what they are doing. I know, as I was a senior investment bank trader for several years before becoming a private investor.

Instead, the main risk I see is a credit squeeze of the same type that sparked the 2007/2008 financial crisis. This was initially caused by defaults in big credit markets that caused liquidity in the financial system to dry up.

That said, analysts currently forecast that Man’s earnings will grow by a very strong 35.7% a year to end-2027.

They also project that the firm will raise its dividend to 13.9p next year and 14.9p in 2027. This would give respective dividend yields of 6.7% and 7.2%. At present, the yield is 6.3%.

How much passive income could it make?

Investors considering a £20,000 holding in the firm would make £21,000 in dividends after 10 years.

This is based on the average 7.2% yield and on the dividends being reinvested back into the stock (‘dividend compounding’).

On the same basis, the returns would rise to £152,307 after 30 years.

With the initial £20,000 investment included, the total value of the holding would be £172,307 by that stage.

And that would deliver an annual passive income (from dividends) of £12,406.

My investment view

Given these projections, I am more than happy to keep my recently bought Man stake.

In fact, I may well increase it again soon, depending on how the rest of my passive income portfolio performs.

And for other investors, I think it well worth considering as a high-yielding dividend asset.

The post Here’s how investors could aim for £12,406 a year from £20,000 in this high-flying FTSE financial star appeared first on The Motley Fool UK.

Making the numbers work

For reference, data shows the current average mortgage payment is £1,253. That provides a benchmark of the size of income that ideally needs to be generated. In order to work out the size of the portfolio, we can work backwards. Without taking on an excessive level of risk, I think an investor could build a pot with an average yield of 7%.

Therefore, the investment portfolio would need to be worth £214,800. Very few would have enough money in a lump sum to make this happen overnight. Yet this isn’t a bad thing. By investing regular smaller amounts over time, it can act to build a stronger and more diversified portfolio over the course of several years.

For example, let’s say £750 was put aside each month. After 14 years, the pot could be worth in excess of £215k. In the following year, even without additional funds, the income payments could equate to £1,253.

Finding stocks that fit the bill

In some respects, the maths is the easy part. After knowing how much is needed to build the income pot, the next stage is to find dividend shares that align with your goals. One option for investors to consider is Man Group (LSE:EMG), which has a current dividend yield of 6.91%.

The investment management firm reported record assets under management (AUM) of £143.19bn back in the summer. For H1, it delivered net inflows of £13bn. This is important as it makes money primarily from the fees and commissions charged on the assets being managed. So the higher the number, the more positive it bodes for future revenue.

The momentum in flows gives me an indication that sentiment regarding the investment manager is strong. I think this is partly due to it having a wide range of trading strategies. As it’s not reliant on just one asset class or style, the risk isn’t all in one bucket. Some strategies underperform, others do well. This helps smooth out swings.

Over the past year, the stock’s down 10%. One risk is that investors might move money out of the active strategies Man provides and into cheaper, passive alternatives. The share price has reacted negatively to this in the past when management reported it happening.

I think Man Group’s a stock for investors to consider who are trying to build up the passive income potential from their portfolio.

The post How much do you need in dividend stocks to pay the mortgage each month? appeared first on The Motley Fool UK.

This is because it features stocks that deliver very high dividends each year. Better still, this is done with minimal ongoing effort from me – hence the ‘passive income’ label.

The income stream can not only be used to make a much more comfortable and/or early retirement. It can also be used on an ongoing basis when younger to improve the quality of life.

Consequently, I am always on the lookout for stocks that meet my three key criteria for inclusion in this portfolio. And I think I have found another.

A very high yield

FTSE 250 investment management firm Man Group (LSE: EMG) paid a dividend last year of 17 cents. That was fixed at a Sterling equivalent of 12.8p, giving a current dividend yield of 8.1%.

By comparison, the current average yield of the FTSE 100 is just 3.4% and of the FTSE 250 only 3.3%.

It also well exceeds my minimum 7% dividend yield criteria for my passive income portfolio. This figure reflects that I can get 4.6% from the ‘risk-free rate’ (the 10-year UK government bond yield). As shares are not risk-free, the additional yield is my compensation for taking that chance.

A very undervalued share price

I also ensure that any such stocks I buy are at least 30% underpriced to their fair value.

The more a stock is undervalued, the less chance there is of it seeing sustained price losses, in my experience. This comprises several years as a senior investment bank trader and decades as a private investor.

Experience has also taught me that the best way to determine value is through a discounted cash flow (DCF) analysis.

The DCF for Man Group shows its shares are 36% undervalued at their current £1.59 price. Therefore, their fair value is £2.48.

Very high earnings growth potential

My final selection criterion is that the business must have annual earnings growth potential of at least 2% above the risk-free rate.

If it does not, then the management would be better off selling off all its assets and investing the proceeds in the 10-year UK government bond. And I would be broadly better off sticking my money in it, rather than in the firm.

Moreover, it is ultimately earnings growth that drives any firm’s share price and dividends higher over time.

A risk to Man Group’s is intense competition in the sector.

However, consensus analysts’ forecasts are that its earnings will grow by a whopping 32.7% a year to end-2027!

Will I buy it?

£10,000 invested in 8.1%-yielding Man Group shares should make me £12,418 in dividends after 10 years. And after 30 years, this could rise to £102,665.

Adding in my initial £10,000 stake, a Man Group holding could be worth £112,665 by then. And this could pay me an annual passive (dividend) income of £9,126 at that point!

This is based on the dividends being reinvested back into the stock – known as ‘dividend compounding’.

It is also based on the 8.1% yield average. However, analysts forecast that this will rise to 8.5% this year, 8.9% next year, and 9.5% in 2027.

Consequently, I will buy the stock very soon indeed.

The post £10,000 in savings? Here’s how investors can target £9,126 a year in passive income from this 8.1%-yielding FTSE financial giant appeared first on The Motley Fool UK.

Naturally, not all of these shares will deliver. Dividends are never guaranteed, and the profits of some mid-cap companies can be erratic. Not all that glitters is gold, as they say.

However, I think Man Group (LSE: EMG) stock could be worth considering as a decent passive income generator in future. It’s fallen 26% year to date, putting the yield at 7.8%. This easily places it among the top yielders in the FTSE 250.

Listed hedge fund

Man Group is an asset management firm that runs various funds for both institutional and private investors. It’s heavily tilted towards quantitative and algorithmic trading, so many of its researchers come from physics and computer science backgrounds rather than traditional finance.

The group makes money in two ways: a steady stream of management fees based on assets under management (AUM), and performance fees earned when its funds beat set targets.

The latter can be more volatile though, as we saw in H1. Management fees held steady thanks to record AUM, but performance fees plunged 64% to $67m, cutting overall profit by 43%. 

The problem was that several big trend-following funds struggled, particularly around April when markets went bananas after President Trump’s reciprocal tariffs bombshell. CEO Robyn Grew called it “one of the most challenging periods for trend-following strategies in 25 years”. 

Despite this, the firm reported a record AUM of $193.3bn at the end of June, with net inflows of $17.6bn during the first half, 11.5% ahead of the industry. 

It reported good growth in its credit platform, which ended with $42.7bn in assets. Credit is less reliant on market trends, so this part of the business can provide more stable fee income. 

Complexity

Man runs a wide mix of strategies across multiple asset classes and regions. While this diversification can reduce reliance on any single strategy, it also adds complexity. Performance drivers can be harder for investors to fully understand compared to run-of-the-mill funds.

Moreover, AUM can dip if an important client pulls money out. In H1, one customer invested $13bn in the hedge fund’s systematic strategy (called Numeric). But this can work the other way, especially in choppy markets. 

Passive income potential

Looking ahead though, Grew struck a confident tone, saying: “We enter the second half of the year with strong momentum.”

Importantly, the interim dividend was held steady, which was encouraging. Man Group has a solid track record of paying reliable dividends.

However, based on forecasts, this year’s dividend is covered just 1.1 times by earnings. That’s a thin cushion. But the good news is that next year’s cover rises above 1.5 times, assuming the payout is held steady and earnings expectations are matched.

This gives a forward-looking yield of 8.3%. In practical terms, it means an investor could aim to generate £2,000 in annual passive income from buying around 15,100 shares. At today’s price of 158p, those would cost roughly £24,000.

Finally, the stock is cheap at just 8.9 times forward earnings. So there might also be some decent share price appreciation if performance picks up moving forward.

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Investing in high-yield stocks requires vigilance. After all, not every chunky payout’s sustainable. And investing in a business that’s later forced to cut dividends seldom ends well. With that in mind, let’s take a closer look at an unloved FTSE 250 firm – Man Group (LSE:EMG) with its 7.6% dividend income offer.

Investigating the yield

Over the last 12 months, the shares of this asset management firm haven’t been on a great run. In fact, they’re down by roughly 25% since last August, which is why the stock now offers such an impressive yield. The problem lies with its performance fees, or rather, the lack of them.

With the financial markets experiencing turmoil, Man Group’s active investing strategies have struggled to deliver market-beating returns across its various funds. As such, despite assets under management actually climbing to record highs, its core pre-tax profits took a nasty 43% hit in its latest interim results.

This perfectly highlights the company’s dependence on its volatile performance fees compared to other asset managers who typically rely on more stable management fees. This makes the firm’s cash flow far more challenging to predict while also making the dividend susceptible to market shocks.

So far, the company’s managed to maintain and expand shareholder payouts for the last five years despite the challenges endured along the way. But with growing macroeconomic pressure, client loyalty and stickiness may soon be getting tested, putting today’s high dividend yield at risk.

Room for optimism

While Man Group’s recent performance leaves much to be desired, there are still some encouraging trends hiding under the surface. As previously mentioned, despite the challenges, the company’s continued to attract fresh client funds, pushing assets under management higher.

That’s important given that a stabilisation of market volatility and the emergence of new opportunities could create some lucrative returns for its active funds. And, in turn, deliver a substantial rebound in performance fees that could send both earnings and the share price flying.

The balance sheet also appears to be in a relatively healthy state with a net cash position. And management also has access to a large undrawn revolving credit facility, granting ample short-term liquidity to support its now elevated dividend yield while awaiting a profit rebound.

The bottom line

All things considered, Man Group seems to offer a unique blend of growth, income and value opportunity for investors. The discounted valuation could make buying shares today a highly lucrative decision if the company’s successful in restoring its performance fee income.

However, there’s no denying this comes with significant risks. The stock will likely remain volatile and dependent on its active funds’ performance, something that management doesn’t have a great deal of control over. After all, the stock market’s notoriously unpredictable in the short term. With that in mind, even with a 7.6% dividend, this isn’t a stock I’m rushing to buy today.

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I tend to look for businesses with low price-to-earnings (P/E) ratios, high dividend yields and solid free cash flow. These are often signs the market has overlooked potential value. 

After some digging, two stocks caught my attention: MAN Group (LSE: EMG) and International Personal Finance (LSE: IPF).

MAN Group

MAN Group’s one of the world’s largest publicly-listed hedge fund firms with a £1.97bn market-cap and a long track record in quantitative and alternative strategies. The shares currently trade for around £1.70 and have a P/E ratio of only 8.7, which is low compared to the financial sector average.

One of the major advantages here is MAN’s capital-light business model. With relatively low fixed costs and scalable operations, the company can maintain strong margins even during volatile market conditions. In fact, market volatility often benefits the firm, as it drives higher performance and management fees.

On top of that, the 7.35% dividend yield looks attractive, especially given the company’s history of special dividends and share buybacks.

However, there are risks. The company’s revenue is closely tied to asset performance and investor sentiment. If markets turn sour, performance fees can dry up quickly. There’s also the macroeconomic angle – rising rates and geopolitical shocks could weigh on investor appetite for hedge fund strategies. 

Still, for those seeking a cheap stock with income potential, MAN Group seems worth considering, in my opinion.

International Personal Finance

With a P/E ratio of just 6 and a £1.56 price tag, this up-and-coming finance stock looks like one of the cheapest shares on the FTSE All-Share.

The £345m company offers consumer credit services in emerging markets, primarily in Eastern Europe and Latin America. While the sector carries more risk than blue-chip financials, the returns can be compelling. Plus, the company has a long track record of awarding cash to its dedicated shareholders, currently sporting a dividend yield of 7.15%.

A key strength is the firm’s local knowledge. The company operates with in-country teams who understand regional lending conditions and maintain close contact with customers. This face-to-face model helps keep default rates manageable, even in less stable economies.

On the flip side, international operations expose it to currency fluctuations and political instability, which can threaten earnings. Regulatory changes are another challenge, particularly if governments impose interest rate caps or tighten lending criteria. Moreover, funding costs could rise if global interest rates stay elevated.

Still, with both a high yield and room for growth, I think it’s a stock worth further research.

Final thoughts

Both MAN Group and International Personal Finance offer an attractive combination of cheap shares with high dividends. They’re not without risks, but the low valuations suggest much of the bad news may already be priced in. 

For investors comfortable with a bit of market volatility, these two stocks could provide meaningful passive income while trading at a discount.

The post 7% yields and low P/E ratios? These 2 cheap shares look promising! appeared first on The Motley Fool UK.