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With the start of another month almost upon us, 2025 continues its relentless and often dizzying march in the stock market. The recent stock market volatility has pushed up the yields on some dividend shares.
For investors looking to grow their passive income streams, here are three shares to consider this May.
M&G
The asset manager M&G (LSE: MNG) is among the dividend shares that lost value over the past several months. But while the share is now around 8% below its March high, it has gained back some ground this month.
The dividend yield currently sits at 9.7%. That makes it the most lucrative of any FTSE 100 share right now when it comes to yield.
The firm is committed to maintaining or growing its dividend per share annually. Last month, it announced another increase in its yearly payout per share, although its modest size did not strike me as a sign of confidence.
That may be understandable. A jittery stock market could lead to investors pulling out funds, hurting asset managers’ profits. That is a concern for any asset manager right now, but I see it as a risk for M&G specifically as it has already been battling net cash outflows from its core business.
Despite that, I see strengths in the investment case, including a strong brand, large client base, and diversified operations spanning multiple markets globally.
British American Tobacco
Economic uncertainty can result in a flight to safety, or at least to assets that are perceived as less risky.
Cigarette maker British American Tobacco (LSE: BATS) has surged 39% over the past year. UK rival Imperial Brands is up 69% during that period and today (30 April) hit a five-year high.
Tobacco does have a captive audience thanks to nicotine’s addictive nature. Even if the economy fares poorly, many of British American’s customers will keep buying at the same rate.
Thanks to low manufacturing costs and the pricing power bestowed by owning premium brands including Lucky Strike, that could help the company keep growing its dividend per share, as it has done each year this century. The 7.3% yield looks juicy to me.
Like Imperial, a key risk for British American’s sales and profits is the long-term decline in cigarette usage. I think it has done a better job than Imperial in expanding its non-cigarette business, but from a long-term perspective, the risk remains substantial.
Legal & General
The number of FTSE 100 financial services companies, like M&G, that currently offer high yields could be a warning about the fragile outlook for the sector.
Seen more positively, though, it means M&G is not the only financial services blue chip with a well-known brand and high yield.
Legal & General (LSE: LGEN) yields 9.1%. It aims to grow its dividend per share annually, as it has in recent years. A share buyback could let it do that without necessarily raising the total it spends on dividends.
The business is strategically focused on retirement-related products. I see that as smart as that market is large, enduring, and resilient.
But it is also crowded. Yes, Legal & General has a large customer base and deep experience, but it has also had weaker earnings over the past several years.
It last cut its dividend following the 2007/08 financial crisis. Another market crisis could hurt profits again.
