Interactive Investor

ii view: FTSE 100 dividend king M&G pursues three-pronged approach

21st June 2023 15:38

by Keith Bowman from interactive investor

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This FTSE 100 asset manager offers one of the biggest yields around and the share price is up 4% year-to-date. Buy, sell, or hold?

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First-quarter trading update to 31 March 2023

  • Assets Under Management and Administration (AUMA) up 0.6% from year-end to £344 billion
  • Capital cushion or Solvency II coverage ratio of 200%, up from 199%

Chief executive Andrea Rossi said:

“M&G started the year building on our strong momentum from 2022. Looking ahead, I'm both confident and excited about the prospects for M&G, as we execute on the strategy outlined at Full-Year Results.  I am enthused by the progress to date and remain focused on delivering operational efficiencies to benefit both clients and shareholders.”

ii round-up:

Previously separated out of Prudential (LSE:PRU), M&G Ordinary Shares (LSE:MNG) today manages money for around five million retail clients and more than 800 institutional clients in both the UK and Europe. 

Its brands include both M&G itself and Prudential brands. 

For a round-up of theses latest results announced on 8 June, please click here

ii view:

M&G is a savings and investment business. It operates across the three divisions of Asset Management, Wealth and Savings including Prudential with-profit products and Heritage taking in historic Prudential savings policies and annuities. Its relatively new strategy now sees its targeting business growth, a simplification of its operations while retaining financial strength. Its many competitors include Schroders (LSE:SDR), Man Group (LSE:EMG) and Ashmore Group (LSE:ASHM)

For investors, higher interest rates may see some clients switch savings towards bank deposits. A cost-of-living crisis could also see customers sacrificing savings to pay increased energy and mortgage bills. Competition across the asset management industry remains intense, while M&G’s adjusted operating profit before tax fell by just over a quarter during its last financial year. 

On the upside, AUMA rose slightly over this latest quarter. Its fund performance remains well-honed, with 68% of its mutual funds ranking in the upper two performance quartiles over one year and 75% over three years as of March. A £200 million cost cutting programme is now being pursued including a rejig of office space and staff numbers, while the company returned nearly £1 billion to shareholders via dividends and share buy-backs in 2022.

On balance, and with the shares on a forecast dividend yield of 10%, income investors at least are likely to remain fans. 

Positives: 

  • Cost cutting initiatives
  • Attractive dividend payment (not guaranteed) 

Negatives:

  • Uncertain economic and geopolitical outlook
  • Intense competition

The average rating of stock market analysts:

Strong hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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