ii view: M&G confident about shareholder returns

Modernising systems, cutting costs, and offering an estimated future dividend yield of over 8%. Buy, sell, or hold?

Full-year results to 31 December 2021

• Revenue up 16.7% to £17.8 billion
• Adjusted operating profit before tax down 8.5% to £721 million
• Capital cushion or solvency ratio strengthened to 218% (2020: 182%)
• Second interim dividend of 12.2p per share
• Total dividend for the year up 0.4% to 18.3p per share
• New £500 million share buy-back programme

Chief executive John Foley said:

"It has been another year of robust operational and financial performance, as we have delivered on all our demerger commitments.

"Our focus remains on delivering long-term sustainable growth and attractive returns to shareholders through a balanced approach to capital management, while investing in priority areas alongside further internationalisation and modernisation of the business. I am confident that 2022 will be an inflection point for us."

ii round-up:

M&G (LSE:MNG) is a savings and investment business. Managing money for both individual or retail savers and institutional investors, it operates across more than 25 markets. Following its demerger from Prudential (LSE:PRU), M&G shares began trading in October 2019. 

M&G now operates under the two brands of Prudential Assurance for savings and insurance customers in the UK and Europe and for asset management in South Africa and M&G Investments for asset management clients globally.

For a round-up of these latest results, please click here. 

ii view:

With a history dating back more than 170 years, M&G today has over five million retail customers and more than 800 institutional clients. Assets under management and administration in this latest financial year rose 0.8% to £370 billion. 

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For investors, initiatives to improve both customer service levels and the performance of its retail funds remain ongoing. A retreat in profit suggests it has more to do in modernising and digitalising its legacy business, while competition in the asset management area remains intense, with low-cost managers such as Vanguard competing hard. 

More favourably, cost savings continue to be pursued, while strategic acquisitions in both the UK and Europe have been made. A push towards green friendly investments is ongoing, while an ageing population and moves by government to place a greater emphasis on individuals to save for their own retirements provides for a favourable backdrop.

Significant capital generation in recent years and a target to achieve a further £2.5 billion come 2024 is also worth remembering, and is expected to comfortably cover expected dividend costs and allow for required investments. In all, and with the shares sat on a historic and estimated future dividend yield of over 8%, income investors may wish to stay patient.  

Positives: 

• Taking action to improve retail investment performance
• Attractive dividend payment (not guaranteed) 

Negatives:

• Intense competition
• Adjusted operating profit retreated

The average rating of stock market analysts:

Strong hold