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One FTSE 100 dividend stock in my SIPP outshines all the rest in my eyes. Its name? Wealth manager M&G (LSE: MNG). It’s delivered a hefty chunk of growth since I bought it in 2023, plus some seriously juicy dividends on top.
When I first added it, the yield was hovering around 10%. That made me a little wary. Ultra-high yields can be a warning sign. They’re often driven by a falling share price, and can point to a value trap or an unsustainable payout.
So I did my due diligence, digging into M&G’s balance sheet, capital strength, cash flows and track record of rewarding investors, and decided to go ahead. Its dividend history is relatively short, given it only demerged from Prudential in 2019, but it looked good enough for me.
M&G shares give me income and growth
I went in big and so far, my conviction has paid off. Lately though, there’s been a wobble. Hardly surprising given global events. The M&G share price has fallen 15% in the last month. That’s a short-term blow for my SIPP, but is it also a long-term buying opportunity?
I’m still well ahead. Despite the setback, M&G shares are up 26% over 12 months and 52% over three years. With dividends reinvested, I’m sitting on a total return of around 75%.
Full-year results, published on 12 March, were mixed but not disastrous. Net inflows hit £7.8bn, reversing last year’s £1.9bn outflow. Assets under management (AUM) rose 8.7% to £376bn. Its Solvency II capital coverage ratio improved from 223% to 242%.
Headline profits were less impressive, edging up just £1m to £838m. However, IFRS profit after tax did swing from a £347m loss in 2024 to a £314m profit. The market response was muted, and the shares have since drifted lower. Investors seem to think current volatility could undo those improving inflows and AUM figures. The next few weeks or months could be bumpy.
FTSE 100 opportunities
The recent share price surge shrank the dividend yield. Now it’s climbed back to 7.5%. The board has a progressive dividend policy, but it’s worth pointing out that future increases are likely to be modest at around 2% a year. The stock also looks a bit pricier than it did. Its price-to-earnings ratio has crept above 22. So I wouldn’t call it a screaming bargain.
If the Iran conflict triggers a bigger market sell-off, M&G is likely to fall further. A prolonged downturn could even put pressure on the dividend. Also, M&G needs to keep expanding into new areas to sustain growth. It has a big opportunity in bulk purchase annuities, and has boosted inflows into its flagship PruFund range. But it needs to keep winning new customers and striking new deals to keep the revenues flowing.
I still think it’s worth considering for long-term income-focused investors. They might prefer to drip-feed money in to take advantage of today’s volatility. The only thing holding me back is that I already have such a big stake, and should probably diversify instead. I can see plenty of attractive income opportunities on the FTSE 100 today. And some look a lot cheaper than M&G.
