M&G (LSE: MNG) is an income share that often flies under the radar despite being a veritable dividend-generating cash machine.
It accumulates capital from its savings, insurance and investment operations, giving it one of the FTSE’s most attractive dividend profiles.
Earnings are forecast to keep rising in the coming years, supporting growing payouts and higher yields over time.
So, what sort of returns can investors expect?
Key drivers for growth
A risk to M&G is a prolonged period of very high volatility in the markets. This can deter investors and reduce fee income. Even so, analysts’ consensus forecasts are that its earnings will grow by a whopping 29% a year to end-2028.
M&G’s latest (half-year 2025) results show a business with several clear drivers of earnings growth. Net inflows of money from clients totalled £2.1bn, compared to outflows of £1.1bn the year before. This £3.2bn swing was underpinned by £2.6bn of net inflows from its core Asset Management division. Strong growth here is expected to continue following May 2025’s long-term strategic partnership with insurance and investment giant Dai-ichi Life.
Despite this growth, M&G managed to cut its cost-to-income ratio from 77% to 75%. Analysts expect this trend to continue, as the firm cements its position as a leading international active asset manager.
Strong growth is also expected in its Life division, which saw adjusted operating profit rise 14% year on year to £112m. M&G will continue to roll out its ‘With-Profits Bulk Purchase Annuity’ (BPA) this year. It expects this value-sharing offering to give it a key advantage in the UK retirement market going forward.
Operating capital generation should also underpin growth, with the underlying figure rising 11% to £331m in H1. The firm remains on course to achieve accumulated capital generation of £2.7bn from 2025 to end-2027. This can be a serious driver of earnings growth in and of itself.
Forecast rising dividend returns
M&G’s dividend has increased every year from 2020’s 18.23p to 2024’s 20.1p. These delivered respective average annual dividend yields of 9.2%, 9.2%, 10.4%, 8.9%, and 10.2%.
It currently yields 6.4%, based on 2024’s 20.1p payout and the present £3.13 share price. By comparison, the current average FTSE 100 dividend yield is just 3.1%.
Importantly for shareholders, the firm announced a shift to a progressive dividend policy in its 2024 numbers. This involves payouts rising at least in line with earnings per share but not being reduced if earnings decline.
Analysts forecast dividends rising to 21.2p this year, 21.9p next year, and 22.9p in 2028. These would deliver respective dividend yields of 6.8%, 7%, and 7.3%.
How much dividend income?
My £20,000 holding in M&G would make me £21,410 in dividends after 10 years and £157,523after 30 years.
This is based on the forecast 7.3% payout, although this could go down as well as up. It also reflects the dividends being reinvested into the stock to utilise the power of ‘dividend compounding’.
By the end of the 30 years, the value of my holding could be £177,523. And this could pay me an annual dividend income of £12,959.
Given this income potential, and the firm’s strong earnings growth prospects, I will add to my holding shortly. And I have other high-yielding stocks on my radar too right now.
