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?
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.”
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.
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.
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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.
- Cost cutting initiatives
- Attractive dividend payment (not guaranteed)
- Uncertain economic and geopolitical outlook
- Intense competition
The average rating of stock market analysts:
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