FTSE 100 dividend stars: City view on M&G, Phoenix and L&G
These insurers are among the best income stocks in the blue-chip index, and an analyst has just upgraded one of them. Graeme Evans reveals why.
14th October 2025 15:27
by Graeme Evans from interactive investor
The case for high-yielding income stocks M&G Ordinary Shares (LSE:MNG), Phoenix Group Holdings (LSE:PHNX) and Legal & General Group (LSE:LGEN) has been made by a City bank after it said the trio are well placed for a step-up in dividend growth.
Berenberg’s analysis includes an upgrade to a Buy recommendation for savings and investment business M&G, alongside continued support for peers Legal & General and Phoenix.
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All three are growing dividend per share “modestly” by 2-3% per annum but the bank expects the pace to accelerate as operating cash generation (OCG) outstrips current uses of cash.
It said: “For now, the UK life insurers’ OCG is being used to fund deleveraging and new business growth, but going forward we believe that it will be used to increase dividend growth.”
Berenberg forecasts a rise in dividend per share growth across 2025-27 to a compound annual rate of 5% at Phoenix, 4% at M&G and 3% at Legal & General.
M&G used annual results in March to announce a switch to a progressive dividend policy, including a 2% increase in May’s full-year payment. The next distribution is due on Friday when it will hand over an interim award of 6.7p a share at a cost of £159 million.
Berenberg said: “While for now M&G is focusing on acquiring new sources of net inflows, including bulk purchase annuities, we forecast that due to strong solvency, dividend per share growth will rise from about 3% per annum now to 4% in 2025-27.”
The bank this week raised its price target to 342p, which compares with today’s level of 264.8p. The shares yield dividend income of 8% based on the bank’s forecasts for the next three years.
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Phoenix has increased the dividend for payment on 30 October by 2.6% to 27.35p a share.
The group, which is preparing to change its corporate identity to Standard Life, said levels of cash, capital and earnings are set to underpin a progressive and sustainable dividend.
Berenberg said: “In the case of Phoenix, we believe that the catalyst to faster dividend growth is the group reaching its 30% deleveraging target in December 2026, down from 34% in the first half of 2025.
“We estimate that deleveraging currently uses about £250 million annually, enough to add about 0.25p or 40%, to dividend per share. We forecast a conservative rise in DPS growth from 3% per annum currently to 5% in 2025-27.”
L&G currently funds new business growth out of capital rather than recurring operating cash generation.
However, Berenberg believes that growth in OCG means that L&G’s funding position will quickly improve, leading it to forecast a rise in its DPS growth to 3% from the company’s own 2% target.
The bank points out that a £1 billion buyback related to the agreed sale of L&G’s US protection unit to Meiji Yasuda will further reduce share count and make faster DPS growth more manageable.
“Overall, we believe that expectations of faster dividend growth will help lift the share price towards our new 289p target.”
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The shares traded at 240p this afternoon, with a dividend yield of more than 9% based on Berenberg forecasts for the next three years.
Phoenix yields between 8.4% and 9.3% based on 2025-27 projections. The bank has a price target of 852p, forecasting well over 20% additional upside on top of the 42% total shareholder return achieved year to date.
The bank added: “With its move to rename itself as Standard Life, which is a strong retail financial services brand, Phoenix is signalling its commitment to grow inflows from new business.
“While assets under management are already growing thanks mainly to strong investment performance, the quality and speed of the growth will improve as new business helps stop – and maybe even reverse – the current stream of net outflows.”
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