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I’ve constructed up a good place in FTSE 100 dividend inventory M&G (LSE: MNG) and executed properly out of it up to now. The shares are up 20% within the final yr, whereas the trailing dividend yield of seven.8% is lifting my complete one-year return in direction of the 30% mark.
The M&G share worth has dipped at present that doesn’t fear me. Shares go up and down on a regular basis. Actually, it intrigues me, as a result of I’m now tempted to prime up my stake earlier than the shares go ex-dividend on September 11, simply over every week away. By doing that, I’ll bag its 2025 interim dividend, paid on 17 October.
The M&G share worth fell 2.8% this morning as issues over rising UK bond yields rattled the market. That was sufficient to pull down different high-yielders too, with Authorized & Basic Group and Phoenix Group Holdings each off by round 3.8%. Decrease share costs robotically carry yields, which makes M&G’s earnings stream look much more interesting proper now.
M&G is a prime dividend payer
I feel M&G seems good for its dividend. It generated £933m of working capital in 2024, beating expectations, and expects to ship £2.7bn over the following three years. The solvency ratio stays sturdy at 223%.
After all, dividends are by no means assured. M&G’s internet fund outflows totalled £1.9bn final yr, as unstable markets unsettled prospects. An extra bout of promoting throughout world equities would knock belongings below administration, which could scare off present prospects and deter new ones.
M&G seems set to extend future payouts by a modest 2% a yr. With inflation at the moment 3.8%, this seems like a reduce in actual phrases. The yield stays greater than wholesome, although.
Interim cost due quickly
At at present’s worth of 257p, a £3,000 funding would purchase round 1,167 shares. In October 2024, M&G paid an interim dividend of 6.6p per share. If the interim cost rises 2% this yr, I’d anticipate this yr’s interim to be round 6.73p. My £3k stake would give me £78.54. That’s sufficient to purchase one other 30 shares or so.
That doesn’t sound like a fortune, however it’s cash in my account only a few weeks after shopping for. Plus, I already personal 3,601 shares. They’ll pay me round £242 subsequent month. So in complete I’d be £320 in October.
That’s simply the primary cost. I’ll get an even bigger closing dividend of round 13.77p subsequent Could, with luck. If I maintain 4,708 shares by then, I’d get one other £650 subsequent Could. That’s why I like earnings shares.
Lengthy-term investing
One factor to recollect is that when a share goes ex-dividend, the worth often drops to mirror the payout leaving the enterprise. So it’s by no means a easy win. However I feel M&G is value contemplating for earnings seekers ready to carry for years, letting these dividends roll up whereas treating any share worth progress as a bonus.
There might be bumps alongside the way in which. Markets might but battle if inflation proves sticky or rates of interest keep increased for longer.
For me, that is about taking part in the lengthy sport. Each dividend cheque provides to the compound returns impact. Shopping for on a dip secures even higher worth. I’ve bought till 10 September to get this commerce executed.
