The FTSE 100 is home to plenty of brilliant dividend shares. However, not all of them are able to match the consistency of Standard Life (LSE:SDLF). But what’s the secret of the pensions and savings group’s success? More importantly, will its excellent track record continue?
Let’s take a closer look.
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Standard Life, until recently known as Phoenix Group, is currently (17 June) yielding 7.2%, more than twice that of the FTSE 100 (3.1%). And it’s been like this for a while now. Looking at the table below, its 2016/25 year-end yield has averaged 7.8%.
| Date | Dividend yield (%) |
|---|---|
| 31.12.25 | 7.4 |
| 31.12.24 | 10.5 |
| 31.12.23 | 9.7 |
| 31.12.22 | 8.2 |
| 31.12.21 | 7.4 |
| 31.12.20 | 6.7 |
| 31.12.19 | 6.3 |
| 31.12.18 | 8.0 |
| 31.12.17 | 6.3 |
| 31.12.16 | 7.7 |
Over this period, it’s increased its dividend every year, apart from during the pandemic. Given the turmoil of 2020, I think we can forgive the group for keeping its payout unchanged when Covid-19 first reared its head.
So how can it consistently yield so much? In my opinion, the answer lies in the company’s impressive capacity to generate lots of cash.
How?
Standard Life is deliberately pursuing a capital-light strategy, which involves placing a greater emphasis on the fee-earning parts of its business. By adopting this approach, it frees up more cash, which can be used for other purposes including paying dividends to shareholders.
In 2025, it produced operating cash of £1.474bn. Of this, £548m was used for the dividend, £503m went towards “other recurring uses” (overheads, debt interest, and capital reinvested in annuities), with £423m left over. The group used the balance (described as “excess cash“) to repay debt as part of its plans to reduce its gearing.
But experienced investors know that dividends can’t be guaranteed. The savings and retirement market is becoming increasingly competitive and more people are having the confidence to manage their own funds, potentially removing the need to rely on industry professionals who will charge a fee. Also, if the group’s investment portfolio struggles, it will have less cash available. In these circumstances, there could be less cash left over to return to shareholders.
However, Standard Life’s recent financial performance demonstrates, so far at least, that it’s able to meet these challenges. And investors appear to be warming to the group.
Since June 2021, its share price has risen by a modest 13%, significantly underperforming the near-50% increase in the FTSE 100. However, since October 2023, it’s up over 75%.
But I don’t think we should get too carried away. Analysts have set a 12-month target that’s around 6% higher than today’s share price. All things considered, I think it’s the dividend that sets the group apart from many others. In my opinion, significant growth would be an added bonus.
A positive outlook
And there could be more to come.
By the end of 2026, Standard Life hopes to complete a £2bn deal to acquire the UK pensions business of Aegon. This is expected to increase operating cash by £160m a year. Over the five years post-completion, it’s forecast to deliver £400m of additional excess cash.
This suggests the group should be in a good position to increase its dividend further over the coming years.
Due to its impressive yield and because of the potential to increase its dividend further, I own shares in Standard Life. Others could consider adding some to their own portfolios.
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James Beard owns share in Standard Life plc.
