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The latest dividend forecasts suggest that asset manager M&G (LSE: MNG) will remain one of the highest yielders in the FTSE 100.
The company issued its annual results this week (19 March), reassuring investors that its dividend remains a priority.
Since being separated from parent Prudential in 2019, M&G’s annual payout has risen from 18.2p in 2020 to 20.1p per share in 2024.
Last year’s payout gives the shares a trailing yield of 9.1%, highlighting its appeal as a big income stock.
The effect of such a high yield is that investors get most of their returns in cash up front, rather than through higher future growth. For investors seeking to maximise their income, this can be a big benefit.
M&G: latest dividend forecasts
M&G’s latest results confirm the company will continue to prioritise its dividend. It generated £933m of surplus capital last year, of which around half will be used to pay the 2024 dividend.
Looking ahead, management are now targeting £2.7bn of capital generation for 2025-27, together with increased cost savings. This suggests to me that the current dividend should continue to rise.
The latest dividend forecasts from City analysts confirm this view:
Dividends are never guaranteed and can always be cut. But in my view, there’s a good chance that an investor buying the shares today could be earning a 10% annual yield on their purchase cost in a few years’ time.
As part of a diversified portfolio of dividend shares, I think M&G could help investors generate a reliable, market-beating income.
The right time to buy?
M&G’s 2024 results looked fairly reassuring to me. Adjusted operating profit rose by 5% to £837m and the company’s Solvency II Ratio – a regulatory measure – rose by 20% to 223%. A higher number is better, indicating more surplus capital in the business.
Assets under management were broadly stable, rising by £2bn to £346bn over the year. I don’t think that’s a bad result, in a fairly difficult market for UK fund managers.
One aspect of this business that attracts me is its age. M&G’s history can be traced back to 1848, more than 170 years ago.
I like to invest in companies with long and consistent histories. I reckon that if a business has been doing something successfully for over 100 years, then it will probably be able to keep on doing it successfully.
Of course, things do change sometimes and leave older companies behind. One risk for active fund managers like M&G is the growth of the passive investing industry.
Cheap passive funds have taken a big chunk of investor money away from active managers. I don’t think that’s coming back.
Fortunately, M&G has a larger exposure to fixed income (bonds) and private assets. These are less affected by the growth of passive investing, which is mostly centred on shares.
Broker forecasts price M&G shares on 10 times 2025 forecast earnings, with a 9.4% dividend yield. That looks reasonable to me. For an investor with a focus on high income, I think M&G is worth considering as a possible buy.
