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This 10.6% yielder beats each dividend share on the FTSE 100. Can it final?


Picture supply: Getty Photos

Simply because a dividend share comes with a mind-bogglingly excessive yield doesn’t robotically make it a prime revenue inventory. Usually, the reverse is true.

Many see an ultra-high yield as a warning sign. Particularly when it hits double digits. However I’m betting that FTSE 100 insurer Phoenix Group Holdings (LSE: PHNX) is an exception.

I purchased the inventory each in January and March as a result of I felt its dividends have been most likely sustainable. I can’t say that for certain, although.

Sky-high revenue

Metropolis analysts appear constructive. At this time, Phoenix has a trailing yield of a staggering 10.94%, however that’s simply the beginning. It’s forecast to yield 11.2% in 2024, rising to 11.5% in 2025. A method of checking whether or not a yield is sustainable is by latest dividend per share development. Right here’s what the charts say.

Created with TradingView

In 2019, Phoenix improve its dividend per share by 1.74% to 46.8p. It then elevated payouts in every of the next 4 years. Within the final three, the share will increase have been notably larger at 2.95%, 3.89%, and three.64%.

So quite than nervously trimming funds, administration has been rising them at a quicker tempo.

Traders want some reward for holding the inventory, and thus far it hasn’t come within the form of share value development. The Phoenix share value is down 12.6% during the last yr, and 30.66% over 5 years.

But the board couldn’t improve funds if it wasn’t producing sufficient money. And the excellent news is that it’s. Once more, right here’s what the charts say.

Chart by TradingView

In 2019, money flows fell 1.92%. They’ve climbed and at an accelerating tempo, rising 1.49% in 2023.

Money flows look robust

In actual fact, final yr was a bumper yr for Phoenix. It was focusing on £1.8bn of money. It smashed that with £2bn. It boasts a stable stability sheet, too, with a Solvency II capital ratio of 176%. That’s close to the higher finish of its 140% to 180% goal vary.

Analysts are optimistic, predicting that 2023’s dividend per share of 52.65p will climb to 54.3p in 2024, 56.1p in 2025, and 57.5p in 2026. I’m feeling a little bit bit happier about my share buy now.

Phoenix might get a re-rating when the Financial institution of England lastly begins chopping rates of interest. It will hit financial savings charges and bond yields, and make its dividend look much more engaging.

I can not reside by dividends alone. In some unspecified time in the future, I’d wish to get some share value development too, however right here the outlook is a little more unsure.

JPMorgan has simply trimmed its Phoenix share value goal from £5.25 to £5. At this time, the shares trades at 4.81p. Not a lot scope for development there.

For now, I’ll console myself with the revenue. I’ll reinvest each penny I obtain to purchase extra Phoenix shares, and hope that someday the market involves my standpoint, and the share takes off. Fingers crossed!


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