Down 10% in a month with a ten% yield! Is that this inventory a no brainer purchase for a second earnings?

Phoenix Group Holdings (LSE: PHNX) could also be a superb inventory for buyers who wish to get the utmost quantity of second earnings they’ll. 

The pensions, financial savings, and life insurer presents the best dividend yield on the FTSE 100, at the moment paying 10.18% a yr. Higher nonetheless, for buyers who like a cut price, the Phoenix share value has fallen 10.49% within the final month. Which means a decrease entry value, greater earnings.

I purchased Phoenix in January and once more in March. Ought to I take this chance to make it a hat-trick of purchases?

Stellar FTSE 100 dividend share

I’ve obtained two beneficiant dividend funds already and the third will hit my account on 31 October. For some time, I used to be having fun with share value development as properly, however alas, the final month’s sell-off modified that and I’m again the place I started.

If at the moment’s yield holds, I’ll double my cash in simply over seven years. Phoenix has a bit good observe report of dividend hikes, as this chart reveals.

There’s an apparent downside, although. Will the share value ever develop? And this begs a second query. Does it matter if it doesn’t?

To be honest, Phoenix shares are up 11.14% during the last yr. The draw back is that they’re down 25.72% over 5. That double-digit yield received’t look fairly so unmissable if my capital is being eroded on the similar time.

At first look, markets seem to have been onerous on Phoenix. In full-year 2023, it delivered a stable 13% improve in IFRS-adjusted working revenue to £617m, pushed by robust development in its pension and financial savings enterprise.

It seems to start out 2024 in the same vein, posting a 15% improve in first-half adjusted working earnings to £360m on 16 September. Nevertheless, the corporate’s accounts are a bit tough to know, and the headline backside line after tax confirmed a lack of £646m. The board pinned that on “adverse economic variances from higher interest rates and global equities which are the consequence of our SII hedging approach”. Perhaps markets aren’t being that onerous on Phoenix in spite of everything.

I’d wish to see the Phoenix share value rise

The dividend nonetheless appears to be like stable as complete first-half money technology jumped 5.8% to £950m. Phoenix is now aiming to hit the highest finish of its £1.4bn to £1.5bn goal vary in 2024. 

The shares might get a carry with analysts forecasting margins will improve from 5.7% to 13% this yr. The 14 analysts providing one-year value targets have a median projection of 575.5p per share, an increase of 11.14% from at the moment’s 517.5p. That’s most likely as a lot as we will hope for, however would give a complete return of greater than 20%. That’s if it’s right.

Regardless of final month’s dip, Phoenix doesn’t look significantly low cost, buying and selling at 15.78 instances earnings, roughly consistent with the FTSE 100 common price-to-earnings ratio. The worth-to-sales ratio is 1.1, which implies buyers are paying 110p for each £1 in gross sales. 

The corporate must develop to impress buyers, nevertheless it’s working in a mature and aggressive market, at an unsure time. It might battle to ship.

I received’t be promoting my Phoenix shares, however I received’t purchase extra at the moment. They provide a superb second earnings, however I’m not satisfied I can reside by dividends alone.