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Dividend stock Phoenix Group Holdings (LSE: PHNX) is finally getting some of the attention it deserves.
While many UK shares have been hammered by Donald Trump’s tariff threats, FTSE 100 dividend shares have escaped the worst of the volatility. Some have even made gains. Phoenix is one of them.
Its shares are up 8% in a week and 22% over 12 months. Not bad for a company often dismissed as a boring back-office insurer. With a price-to-earnings ratio of just 12.75, the shares still look reasonably priced.
Can the share price climb higher?
Phoenix runs a solid, steady business. It acquires closed life insurance books, the kind other companies no longer want to manage, and runs them down efficiently, benefitting from economies of scale.
It’s not flashy, but it works. To broaden its income base, it has expanded into pensions and retirement products. Operating in a mature sector, it’s unlikely to set the market alight, but that’s not the attraction here.
This stock is all about income. The trailing dividend yield stands at a chunky 9.33%. At that rate, the dividend alone could double an investment in under eight years. Any capital growth comes on top.
Of course, a yield this high raises eyebrows. In today’s climate, many will rightly wonder if it’s sustainable. But Phoenix has a decent track record. It’s increased its payout in eight of the last 10 years, and latest results suggest it’s in good shape.
In 2024, Phoenix generated £1.4bn in operating cash. That’s up 22% year on year and two years ahead of schedule. It’s now targeting £5.1bn over the three years from 2024 to 2026, up from the previous £4.4bn.
The company also repaid £250m of debt last year, plus more in February. The board’s goal now is to cut leverage to around 30% by the end of 2026.
Income today, potential growth tomorrow
The final dividend for 2024 was lifted 2.6% to 27.35p, taking the full-year payout to 54p. The next instalment arrives on 21 May. I’ll be keeping an eye out for it, since I hold the shares.
Naturally, there are risks. Phoenix manages around £280bn in assets, and volatile markets could dent that, even with hedging. It also relies heavily on disciplined capital management. If investors ever sense the dividend is under threat the share price could suffer. If it’s frozen or cut, that will hurt. Given the company’s consistent delivery, that risk seems worth taking.
Phoenix won’t woo the growth crowd. US tech giants have stolen the limelight for years, and with cash and bonds offering 5% yields lately, many income investors have played it safe.
But sentiment could shift. Overpriced tech is already feeling the Trump effect. And when interest rates fall, Phoenix’s dividend may look even better.
It’s a tortoise, not a hare. But in these jittery markets, that might be exactly what’s needed for me to win the race.
