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Wealth supervisor M&G (LSE: MNG) and insurance coverage conglomerate Phoenix Group Holdings (LSE: PHNX) are my two fave FTSE 100 dividend earnings shares. After at the moment’s inventory market downturn, I like them much more.
A fast look at both firm will reveal why I’m a fan: each supply mind-boggling ranges of earnings.
M&G yields 10.22% a yr and Phoenix presents an much more beneficiant passive earnings of 10.31%. On the FTSE 100, solely Vodafone Group presents a better yield, however that’s not going to final. The telecoms large will halve shareholder payouts in March 2025.
Why I like M&G
Yields are calculated by dividing the dividend per share by the share value. So when shares fall, as they’re doing proper now, the yield rises. It’s easy maths.
This additionally factors to an issue. M&G and Phoenix pay a lot earnings as a result of their shares have accomplished so poorly.
Over one yr, the M&G share value is up simply 3.58%. That trails the FTSE 100 as an entire, which rose 5.12%. Phoenix did worse, falling 0.75%. This isn’t a one-off dip. Over three years, they’re down 13.25% and 22.73%, respectively.
UK monetary shares have been out of favour for a while now. That’s partly resulting from excessive rates of interest. Traders can get 5% a yr from money or bonds, with no danger. Whereas M&G and Phoenix supply much more earnings, capital is in danger as with all inventory.
That doesn’t fear me personally. I purchase shares like these with a long-term view. I anticipate each firms to thrive over time, giving me much more earnings and development than any financial savings account or authorities bond. Albeit with much more volatility alongside the best way.
The primary main query is whether or not their dividends can survive. As soon as a yield tops 10%, it’s within the hazard zone. Simply ask Vodafone traders. Nonetheless, I’m betting that these two will.
Phoenix Group may additionally fly
The M&G board has clearly acknowledged its coverage of “delivering stable or growing dividends to our shareholders”. I feel the dividend is prone to stay secure, however development could also be in brief provide. The board elevated the dividend per share by simply 0.1p to 19.7p in 2023. Markets didn’t like that and the share value has taken the brunt of their displeasure. Given the large yield, I’m in a extra forgiving temper.
Phoenix has a strong dividend observe of late, rising shareholder payouts in seven of the final 9 years. Within the different two years, it froze them. A kind of years was the pandemic, in order that’s fairly forgiveable. Let’s see what the chart says.
Chart by TradingView
Dividend development might sluggish however I received’t be crying in my pillow if it does. What I don’t wish to see is a dividend lower. That will most likely torpedo their share costs, too. I don’t suppose we’ll get one however who is aware of?
It brightens my day up each time their dividends hit my self-invested private pension (SIPP). If I can discover any money, I’ll benefit from the market tantrum and purchase extra of each.
