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Every time I have a look at this breathtaking FTSE 100 dividend inventory, I assume I should be lacking one thing.
The corporate in query is insurance coverage conglomerate Phoenix Group Holdings (LSE: PHNX). The rationale I can’t fairly consider my eyes, is that it yields a thumping 9.68%, one of many highest dividends round.
The rationale I assume I’m lacking one thing is that buyers aren’t piling in to make the most of this huge earnings alternative.
FTSE 100 earnings hero
The Phoenix share worth has crashed 22.09% over 5 years. Over 12 months, it’s down 1.67%. Don’t buyers like dividends anymore?
I like dividends, particularly huge fats juicy ones like this. But I’m not daft, I do know shareholder payouts can develop into extremely susceptible as soon as yields hit this insane stage. Little doubt many buyers concern the board shall be pressured to chop sooner or later, and the shares will fall consequently.
But Phoenix truly has a strong observe document of dividend per share progress, as my desk reveals.
| 2015 | 0.4084p |
| 2016 | 0.4084p |
| 2017 | 0.4406p |
| 2018 | 0.4517p |
| 2019 | 0.4680p |
| 2020 | 0.4680p |
| 2021 | 0.4820p |
| 2022 | 0.4960p |
| 2023 | 0.5200p |
Whereas the board froze the dividend in 2016, and once more in 2020 in the course of the pandemic, sometimes it has hiked them yearly.
Dividends gained’t survive until firms generate the money to pay them. Final yr, Phoenix set itself a goal of producing £1.8bn of money. It made £2bn.
Markets appear assured of additional dividend progress, with the yield forecast to hit 9.93% this yr, then 10.2% in 2025. Like I stated, breathtaking. That’s double the earnings I may get on an quick access financial savings account immediately.
Phoenix Group might lastly rise
The hole will widen when the Financial institution of England lastly begins chopping rates of interest, which may occur as early as tomorrow’s 1 August assembly.
Investing in shares is at all times riskier than leaving cash within the financial institution, as a result of capital is in danger. But on this case, I feel the rewards outweigh the dangers. Particularly since Phoenix has a strong stability sheet, with a Solvency II capital ratio of 176%. That’s close to the higher finish of its 140% to 180% goal vary.
It’s working in a aggressive market, as rivals embrace FTSE 100 giants Aviva and Authorized & Common Group. The sector has been hit as rising inflation drives up claims prices, whereas lowering the worth of the a whole bunch of billions they maintain in belongings to cowl liabilities. All three supply excessive yields immediately, as their share costs have floundered.
Sure that’s altering. The Phoenix share worth is up 10.66% during the last three months. Are buyers lastly waking as much as the chance?
I purchased Phoenix shares in January and once more in March. I’m up simply 5.33% however I’ve additionally acquired two dividend funds. After re-investing these, my complete return is 14.22%.
These are early days, and I feel there’s much more to come back. Even when its share worth restoration is postponed once more, I’ve nonetheless received the earnings. If extra folks come spherical to my mind-set, Phoenix may fly. I’ll purchase extra in August, in case it does.
