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Dividend inventory Phoenix Group Holdings (LSE: PHNX) is lastly getting a number of the consideration it deserves.
Whereas many UK shares have been hammered by Donald Trump’s tariff threats, FTSE 100 dividend shares have escaped the worst of the volatility. Some have even made positive factors. Phoenix is one among them.
Its shares are up 8% in per week and 22% over 12 months. Not unhealthy for a corporation usually dismissed as a boring back-office insurer. With a price-to-earnings ratio of simply 12.75, the shares nonetheless look moderately priced.
Can the share value climb larger?
Phoenix runs a strong, regular enterprise. It acquires closed life insurance coverage books, the sort different corporations not wish to handle, and runs them down effectively, benefitting from economies of scale.
It’s not flashy, nevertheless it works. To broaden its revenue base, it has expanded into pensions and retirement merchandise. Working in a mature sector, it’s unlikely to set the market alight, however that’s not the attraction right here.
This inventory is all about revenue. The trailing dividend yield stands at a chunky 9.33%. At that charge, the dividend alone might double an funding in underneath eight years. Any capital progress comes on high.
In fact, a yield this excessive raises eyebrows. In at this time’s local weather, many will rightly marvel if it’s sustainable. However Phoenix has an honest monitor document. It’s elevated its payout in eight of the final 10 years, and newest outcomes recommend it’s in good condition.
In 2024, Phoenix generated £1.4bn in working money. That’s up 22% 12 months on 12 months and two years forward of schedule. It’s now concentrating on £5.1bn over the three years from 2024 to 2026, up from the earlier £4.4bn.
The corporate additionally repaid £250m of debt final 12 months, plus extra in February. The board’s objective now could be to chop leverage to round 30% by the top of 2026.
Earnings at this time, potential progress tomorrow
The ultimate dividend for 2024 was lifted 2.6% to 27.35p, taking the full-year payout to 54p. The subsequent instalment arrives on 21 Could. I’ll be holding an eye fixed out for it, since I maintain the shares.
Naturally, there are dangers. Phoenix manages round £280bn in property, and risky markets might dent that, even with hedging. It additionally depends closely on disciplined capital administration. If buyers ever sense the dividend is underneath risk the share value might endure. If it’s frozen or minimize, that can damage. Given the corporate’s constant supply, that threat appears price taking.
Phoenix gained’t woo the expansion crowd. US tech giants have stolen the limelight for years, and with money and bonds providing 5% yields currently, many revenue buyers have performed it protected.
However sentiment might shift. Overpriced tech is already feeling the Trump impact. And when rates of interest fall, Phoenix’s dividend could look even higher.
It’s a tortoise, not a hare. However in these jittery markets, that is likely to be precisely what’s wanted for me to win the race.