Britain’s FTSE 100 index is a great place to bag a top income stock. UK blue chips boast some of the most generous dividend yields in the world.
Yields of 5%, 6%, or more than 7% are readily available and, with luck, investors will get some decent share price growth on top. One of my favourite stocks is wealth manager M&G (LSE: MNG). It’s given me bags of income and growth since I added it to my SIPP three years ago.
I don’t draw any of those dividends. I plough every single one back into the stock, to build my position. That buys me more shares, which will pay me more dividends, which I’ll reinvest to buy even more shares over time. A good dividend stock will steadily compound wealth over time.
How well have M&G shares done?
The M&G share price is up 25% over the last year, and an impressive 60% over two. All dividends are on top, and the trailing yield right now is 6.3%.
When I originally bought M&G I locked into a stunning 10% yield. So I’ve been doing particularly well but I think today’s yield is still highly attractive. I bought 3,028 M&G shares from my own pocket. I’ve picked up another 830 shares from reinvested dividends. In total, I now own a grand total of 3,858 shares.
In 2025, M&G paid a total dividend per share of 20.5p. The board plans to raise shareholder payouts by 2% a year in future. That’s a slower pace than before, which means the value could erode if inflation remains high. However, it is starting from a high base.
In 2026, it’s likely to pay me 20.9p for each stock I hold. With 3,858 shares, I can look forward to a passive income of £806. At today’s share price of 325p, that would be enough to pick up another 248 shares. Which would lift my total to 4,106. If M&G pays 21.3p per share in 2027, I’ll get almost £875. I’m not just getting a high income here, but a rising one.
Dividends aren’t guaranteed but this one looks solid. M&G has a Solvency II coverage ratio of 242%. The company says this is well above its long-term operating target range of 160% to 190%, and gives it an “exceptionally strong capital position”.
Will investors get growth too?
That should allow it to continue making dividend payments, even if the stock market is volatile and the shares fall. With most stocks, the growth comes in fits and starts. If the dividends keep coming in a regular flow, that will smooth the overall return.
M&G faces challenges. It’s an active fund manager, and is under pressure from the rise of passive index-tracking ETFs. It makes money from customer fees, some of which are based on the value of the assets it manages. If the stock market falls, those assets will be worth less, and so will the fee income.
Personally, I think M&G is well worth considering for long-term income investors. The forward yield is 6.52% for this year and 6.72% in 2028. With a forward price-to-earnings ratio of 13.4, it doesn’t look too expensive either.
Should you invest £5,000 in M&g Plc right now?
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Harvey Jones owns shares in M&G.
