At the end of May 2024, I had a rush of optimism over FTSE 100 dividend income stock M&G (LSE: MNG). I knew it offered a whopper of a yield, 9.82% at the time, but also suspected something was stirring on the capital growth front. The business looked undervalued, and I felt it wouldn’t take much for sentiment to turn.
I’m not blessed with a crystal ball. But every now and again, the thesis plays out. This looks like one of those times.
Solid progress
I thought M&G’s ultra-high income appeal might tempt more investors to look again. And I hoped that improving results might nudge the stock higher. Since then, it’s done pretty well, jumping 20%.
It’s a stretch to call that a bull run, but it’s still pretty decent. Over five years, the rise is closer to 60%. The comparison’s flattered slightly because it dates to the pandemic panic of 2020.
Those numbers don’t include dividends either. They lift the total one-year return towards 30%. Over five years, it’s comfortably above 100%. Not bad for a supposedly boring stock.
Improving results
Full-year results published on 19 March showed an adjusted pre-tax operating profit of £837m in 2024, up 5% on the year before. That beat consensus forecasts of £769m, driven largely by a 19% jump in asset management profits.
There was a headline-grabbing £347m statutory loss, dragged lower by fair value hits on surplus annuity assets and interest rate hedging. But the underlying numbers told a more encouraging story.
Assets under management ticked up to £345.9bn, while the final dividend was lifted from 19.7p to 20.1p. That’s a modest 2% increase, but still progressive.
On 30 May, M&G shares surged 7% after Japan’s Dai-ichi Life Holdings revealed it was taking a 15% stake. The two firms have struck a long-term partnership, with M&G now Dai-ichi’s preferred asset manager in Europe.
The tie-up is expected to bring in $6bn of new business flows over five years, a proper vote of confidence in M&G’s global potential.
Not without risk
Can the strong run continue? M&G still operates in a mature and competitive market, where fee pressure’s intense. In the era of passive investing, active managers must work hard to prove their worth. The dividend looks safe for now but future increases could be modest. A payout of this size rarely rockets higher.
If it were cut, that could change the story very quickly. But based on current guidance and balance sheet strength, I don’t expect that to happen.
For now, this remains one of my favourite FTSE 100 dividend income plays, even though the yield’s slipped to 8.3% today. I loaded up in 2023, and my total return so far is around 40%, roughly half from dividends and half from the share price. That works for me.
Can the rally continue? It could easily slow. The median 12-month target from 10 analysts is 234p, around 3% lower than today’s 241p so anyone considering it may want to wait for any possible price pullback. Three call it a Strong Buy, while eight are sitting on Hold. None say Sell.
I have no plans to sell. I don’t need M&G to begin a bull run, I just need it to keep pumping out those dividends. I’ll treat any growth as a bonus.
