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Could the 9.8% M&G dividend yield be even bigger?

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Passive income from dividends can be a powerful motivator for investment. Take my part M&G (LSE: MNG) for example. The dividend yield on the asset management company is 9.8%. This means that, if I spend just £100 on shares today, I can expect to receive a £9.80 M&G dividend per year.

In reality, things could be even better.

gave FTSE 100 The firm’s policy objective is to increase its profits every year. M&G’s payout per share has increased annually since the split. Prudential In 2019 It has also bought back shares during this period, meaning it has been able to pay a larger dividend per share while actually spending less overall on these payments.

But profits are never guaranteed. M&G has a stated dividend policy that does not foresee a cut, but whether it can deliver will depend on how the business performs in the future.

Ongoing strengths – and challenges

I remain optimistic about the firm’s outlook. In fact, this is why I hold onto my shares.

Demand for asset management is high. The sums involved are substantial, so the opportunity for fees and commissions is considerable.

M&G’s retail client base spans millions. On top of that, it also has institutional clients. Thanks to its geographical spread, well-known brand and long experience in asset management, I think it can differentiate itself from competitors. This should be good for business performance.

Excluding its heritage business, the firm saw net client flow of £1.1bn last year. In other words, more money came in than went out.

It generated around £1bn of operating capital. I think that’s impressive given its market capitalization of £4.8bn. It also matters because generating capital is the basis for maintaining the M&G dividend.

That doesn’t mean all is smooth sailing. One risk I am concerned about is client churn in the UK institutional business. This happened last year and may continue due to changes in the defined benefit pension market. A weak economy that causes retail customers to withdraw funds can also hurt revenues and profits.

A promise of profitable outlook

On balance though, I’m optimistic about the long-term outlook.

So I expect the M&G dividend to not only sustain but grow. On this basis, while the current yield is already juicy at 9.8%. Possible The yield can also be higher.

This places M&G in the very top tier of FTSE 100 income shares, ranked by yield.

Since the listing, share price performance has been weak, with the share value falling by 11%.

But I like the passive income approach here and have no plans to sell.


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