As a shareholder in asset manager M&G (LSE: MNG), I like the hefty dividends the firm pays. But sometimes a high dividend yield can be a red flag that a cut might be on the cards. So, looking at the M&G dividend forecast, does it make sense for me to continue holding the shares?
In short, I think it does – and that is what I plan to do.
I reckon there is a good chance that M&G will be able to maintain its current payout. In fact, I think we may even see modest rises in coming years.
The company’s strategy is to maintain or increase the payout each year. But a strategy does not guarantee what will actually happen in practice. After all, dividends are never a sure thing.
Last year, the annual payout grew, albeit by a fraction of a percentage point. At the interim stage this year, the dividend grew 1.6% compared to the same point last year. The recent direction of travel is in line with the company’s stated strategy.
M&G dividend forecast
So, will there be an increase at the full-year level and in years to come?
That depends on how the business performs. At the interim stage, M&G struck a positive note at the same time as lifting its interim payout. It said it was “cautiously optimistic” about the turnaround in its wholesale asset management division. That part of the business had reversed a trend of net client outflows. Across the business overall, excluding its Heritage operations, the picture was the same.
M&G said it expected to deliver “consistently strong investment performance set against a challenging period for our sector” for 2022. Full-year results including details of the final dividend are due to be released on 9 March.
Strong performance could help the company make good profits and support an increased payout. With its well-known brand, large customer base and deep City experience, I think the asset manager has the building blocks in place to make that happen.
But things could still work out differently.
Although the company turned around client flows in the first half, it will need to keep working hard in future to maintain positive client inflows. The market is competitive. Turbulent stock markets may also lead some investors to withdraw funds. Short-term swings in asset values could also eat into reported profits, although I think the long-term outlook remains appealing.
Such swings explain why the company reported a post-tax profit of £92m last year, insufficient to cover the dividend. But as a long-term investor I remain confident, as the couple of years before that saw post-tax profits of over £1bn each. I think it is realistic to expect similar annual earnings for at least some future years. That could comfortably cover a dividend above today’s level.
The M&G dividend forecast looks good to me. I expect to keep receiving payouts that equate to a 9.2% yield at the current share price — or higher.
For that reason, I plan to hold my shares indefinitely.
The post 9%+ yield! The M&G dividend forecast has caught my eye appeared first on The Motley Fool UK.
Could M&G grow your wealth after 50?
Quite possibly. But one share pick is by no means enough.
So, please go here now.
Discover ‘5 Stocks for Trying to Build Wealth After 50’.
All these share picks come from The Motley Fool UK’s top analysts.
They’ve done the hard research. Now, they believe these 5 shares could offer investors spectacular long-term potential. And this special investing report is yours, absolutely FREE.
Whatever your age, there’s no big secret to building wealth with shares. In a nutshell, we believe in buying:
- 15+ different shares
- In strong, high-quality companies
- And holding them for the long-term
This free report gets you started on the same journey.
Please don’t leave this website without it.
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#ffffff”, ‘color’, ‘#FFFFFF’);
- 3 FTSE 100 shares paying very high yields
- As the FTSE 100 hits new highs, I’d snap up these 2 cheap shares
- 9% yield! Should I buy this FTSE 100 dividend stock in February?
- 2 dirt-cheap, high-yield UK shares I’ve bought to hold for a decade
- These 2 FTSE 100 stocks yield 7% and 9% and I can’t wait to buy them
C Ruane has positions in M&g Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.