Personally, I think I’ve found all of those things in FTSE 100 wealth manager M&G (LSE: MNG). I’m sitting on a total return of 92% since adding this stock to my Self-Invested Personal Pension (SIPP) in July 2023, less than three years ago. The share price has climbed from 200p to 300p in that time, an increase of 50%. Reinvested dividends have done the rest.

It helped that M&G shares were yielding 10% when I bought them, which is an extremely high rate of dividend income. But it’s also a brilliant example of how income can turbocharge growth. The dividend hits my account twice a year, typically in May and October, and I really notice the difference. I’ve bought 3,028 shares from my own pocket. Today, I own 3,858. The additional 830 were bought from reinvested dividends.

Why do I like FTSE 100 income stocks so much?

I think many investors underestimate the power of FTSE 100 stocks. The index has grown nicely lately, rising 45% over the last five years.

That’s below the 77% increase on the S&P 500, but UK blue-chips pay more income. The average yield on the FTSE 100 is 3.3%, against roughly 1.1% for the S&P 500. That narrows the gap, especially for investors who target higher yielders like M&G.

Today, investors won’t get the same level of income as I did. The trailing yield is now 6.8%. That’s still pretty generous, and with luck, it’s only for starters.

The board is aiming to increase shareholder payouts by 2% a year. That’s forecast to lift the yield to 6.99% in 2026 then 7.2% in 2027. Dividends are never guaranteed, but I think M&G looks in decent shape to support them. Last year, its Solvency II coverage ratio hit 242%, up from 223% in 2024, driven by strong operating capital generation and favourable market movements. M&G only joined the FTSE 100 in 2019, but has increased shareholder payouts every year since. So what about the growth?

Can the M&G share price keep climbing?

That isn’t guaranteed either, of course. And I think the M&G share price could slow after such a strong run, that’s seen it climb 40% in the last 12 months. Yet with a forward price-to-earnings ratio of 12.4, I don’t think investors are overpaying today.

Obviously, these are volatile times, and if we get a wider stock market correction, M&G shares will feel it. It also operates in a fiercely competitive market and needs to keep finding new streams of business to maintain growth and keep the cash flowing. But while future share price gains may come in fits and starts, the steady stream of reinvested dividends should help total returns compound nicely over time.

Personally, I think M&G is one of the most compelling passive income opportunities to consider in the FTSE 100 right now. I’ll be watching closely to see whether it can sustain those dividends, while continuing to deliver some growth on top.

The post Why this 6.8% high yielder is now my favourite UK passive income and growth stock appeared first on The Twelfth Magpie.

That can be a lucrative approach to generating money without having to work hard for it. To illustrate, let’s imagine somebody has a spare £5k they want to invest.

Choosing a suitable investment vehicle

The first step will be putting that money somewhere it can be used to buy and hold shares that hopefully will earn dividends. That may be a share-dealing account, Stocks and Shares ISA or trading app, for example.

Lots of different options exists and different investors have different priorities, so it is important to take some time and compare choices.

Buying a diversified range of blue-chip shares

The money can then be put inside the vehicle. Once the investor feels confident that they understand at least basics of stock market investing such as how to value shares and what allows a company to fund dividends, they can start to buy dividend shares.

Even the best companies could run into difficulties. A simple way to reduce the risk if one share does that is to diversify across a few different choices and £5k is ample for that.

As dividends are never guaranteed to last, it is important to look carefully at companies and consider not only their current business performance but also their future prospects, as well as how accurately today’s share price reflects that.

My own focus tends to be on investing in proven companies that have shown their business model works. Lots of blue-chip shares that make profits and pay dividends can provide a fertile hunting ground.

Earning the income

How much £5k might generate in passive income depends both the dividend yield and timeframe. Yield is what the shares pay annually in dividends, expressed as a percentage of their purchase price.

Currently the FTSE 100 yields around 3% but I think a 6% yield is an achievable target in the current market. On £5k, that would mean some £300 a year of passive income.

But an investor might decide to reinvest dividends. This is known as compounding and can be a financial force multiplier. Compounding £5k at 6% for 10 years, for example, it would grow large enough to earn around £537 of passive income each year.

Or, if someone was willing to wait for 20 years before drawing down the dividends, compounding could help them reach a point where they earn £962 of passive income annually.

One income share to consider

I think a dividend share investors should consider is M&G (LSE: MNG). The FTSE 100 asset manager aims to raise its dividend per share annually. That is not guaranteed, but M&G has managed in recent years. It yields an attractive 6.8% right now.

There are risks. With millions of customers spread across multiple markets, M&G could see some pulling out funds amid market choppiness like we are seeing this year. That could hurt profits – and perhaps dividends.

But I see that large customer base as an asset. The company has a strong brand and deep asset management expertise. It is also a proven cash generator. That bodes well for future dividends.

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• Robust balance sheets.
• Diverse revenue streams that deliver resilient earnings.
• Competitive advantages that protect profits and dividends, even in downturns.
• Mature business models that prioritise dividends over capital investment.

The thing is, no dividend-paying share is without risk. Take Diageo, which cut the dividend in February following sales pressures. It had consistently grown the annual dividend for more than 25 years prior to this.

Want to know how to build a resilient second income with an ISA? That’s great, because I have a plan…

Dividends for growth

Dividends are a powerful tool for creating long-term wealth. By reinvesting these cash rewards, investors can accelerate the compounding process, leading to incredible portfolio growth.

The bigger the ISA, the larger the passive income that can be generated in retirement. I’ll show you how.

Let’s say you’re putting £300 in a Stocks and Shares ISA each month. With this, you build a shares portfolio with an average 4% dividend yield. If you spent rather than reinvested your dividends, after 25 years you’d have an ISA worth roughly £178,000, based on a total average return of 9%.

But what about if you instead reinvested these dividends to grow the portfolio? Now we’re talking. With this included, you’d have an ISA worth around £351,000. That would then deliver an £28,000 yearly income if invested in 8%-yielding stocks.

Which FTSE 100 shares to buy?

As I say, dividends are never guaranteed. But here’s the thing: buying a wide selection of dividend-paying shares can deliver an extremely reliable income stream over time.

Here’s an example of what a well-diversified portfolio might look like:

This collection has a decent record of dividend growth, ranging from six years to more than half a century. It has a healthy average dividend yield of 4.3%, beating that one we used in the earlier example. And importantly, it’s well diversified by sector and region, providing resilience across the economic cycle.

M&G’s a dividend share I’m looking at for my own portfolio. It has the shortest length of dividend growth among this grouping. But that’s not a negative thing — it simply reflects the fact it’s only been a standalone business since 2019.

Since then, annual dividends have grown every year, even during pandemic-hit 2020. The reason? Its capital-light operations and recurring fee-based income have supported robust cash generation.

M&G’s Solvency II capital ratio’s 242%, up from 223% a year ago. So even if an economic downturn impacts its share price, the company remains in good shape to keep paying a large and growing dividend. I think it’s one of the best FTSE income shares to consider right now.

The post 9 dividend-paying FTSE 100 shares to target a huge ISA retirement income! appeared first on The Twelfth Magpie.

Such an approach can have both pros and cons. Here are a couple of each.

Pro: it’s a genuinely passive income approach

Some so-called passive income plans seem anything but passive to me in practice. For example, they can involve all the initial legwork of setting up a business even if, supposedly, it will effectively run itself in future.

By contrast, it is possible to buy shares, then sit back and earn any dividends they pay. That is what I regard as genuinely passive.

Con: dividends aren’t guaranteed

If you put money into a Cash ISA, a fixed passive income is almost guaranteed. I say almost because there may be exceptional circumstances, such as a run on a bank as happened at Northern Rock less than 20 years ago.

Even then though, depositors are ordinarily automatically insured up to a certain level, so even though the promised returns may not materialise, their capital ought to be safe within that limit.

Dividends, by contrast, can move around and often do. Some go up, some go down, some disappear altogether, whether temporarily or forever.

A properly diversified portfolio of dividend shares can help reduce the possible impact of that risk on passive income streams, but it remains a risk.

Pro: participate in the potential gains of a brilliantly-performing business

Looking at that comparison from another perspective though, fixed interest rate investments tend to have a maximum possible return.

Compare that to a share like M&G (LSE: MNG). The share yields 6.8%, meaning that someone who invests £100 today will hopefully earn £6.80 in passive income each year.

In fact, they could earn more, as the FTSE 100 asset manager aims to grow its dividend per share annually and has done so over the past few years (though, of course, that is never guaranteed).

Not only that, but the share price has grown 38% over the past five years.

So £100 invested in May 2021 would now be worth £138, even before taking into account passive income from dividends.

Owning shares in a business that does well can potentially therefore help someone earn passive income — and also capital gains.

M&G has a client base in the millions, multinational footprint and deep asset management experience I think can help it.

Con: money’s at risk

Again though, there is a flipside. Like any business, M&G faces risks. For example, current stock market turbulence could see clients pull money from its funds. If that happens, earnings might fall – and that may be bad news for the dividend.

Money in the bank, as I explained above, is typically protected by certain industry-backed guarantees like the Financial Services Compensation Scheme. Dividend shares offer a different risk profile. Not only are dividends not guaranteed, but the shares also carry the risk of capital loss. Then again, as I demonstrated with M&G, they carry the potential for capital gain.

In fact, I see M&G as a dividend share for investors to consider right now.   

The post Some pros and cons of buying dividend shares for passive income appeared first on The Twelfth Magpie.

The key for passive income made from shares is not chasing the highest yield. It is understanding which companies generate the steady, recurring cash that can support those payouts.

And that is where the market often gets things wrong, especially with businesses that look far riskier on the surface than they really are.

How solid’s the underlying business?

One FTSE company that suffers from this kind of misunderstanding is M&G (LSE: MNG). At first glance, it looks like a traditional fund manager exposed to market swings, fee pressure, and unpredictable client flows.

But that impression is misleading. M&G is a hybrid business with several different engines of cash generation, many far more stable than investors assume.

The group combines a capital‑light asset‑management arm with capital‑heavy life‑insurance and annuity operations. These are all supported by a large balance sheet generating recurring investment income.

This mix gives the company multiple and independent sources of cash flow — fee income, insurance profits, and surplus capital generation. And it is this hybrid structure, rather than any single line of business, that makes M&G capable of supporting a high, sustained level of passive income.

How are these factors working now?

All these factors can be seen at play in M&G’s 2025 annual numbers released on 12 March. Net flows from open business swung to a £7.8bn inflow from a £1.9bn outflow the year before. The turnaround highlights the strength of both the asset‑management and life businesses in attracting new money.

Adjusted operating profit remained stable at £838m, illustrating how M&G’s diversified mix of fee income, insurance profits and investment returns helps smooth volatility.

A risk for M&G is sustained bearishness in financial markets that could pressure assets under management and fee income. Another is any tightening of regulatory capital requirements, which could hamper its ability to deploy capital freely in volatile conditions.

Nonetheless, analysts forecast its earnings will grow by a whopping annual average of 31.2% to end-2028. And it is growth here that powers any company’s dividends over the long run.

How much passive income can be made?

Analysts forecast M&G’s dividend yields increasing to 7.1% this year, 7.3% next year, and 7.6% in 2028.

So, a £20,000 holding in M&G (the same as mine) would make £22,663 in dividends after 10 years and £174,133 after 30 years. The numbers assume the forecast 7.6% yield as an average, although this can go down as well as up. They also assume the dividends are reinvested back into the stock to harness the turbocharging effect of ‘dividend compounding’.

At the end of that time, the holding could be worth £194,133. And this would pay a yearly passive income of £14,754!

My investment view

M&G’s hybrid model gives it multiple levers to support and grow its dividend, even when markets are unsettled.

For investors seeking long‑term passive income, that combination of stability, yield and compounding potential is hard to ignore.

And I for one will be adding to my holding in the stock as soon as possible. I also have my eye on other high-yielding stocks in other sectors.

The post How am I targeting an annual passive income of £14,754 from just a £20,000 holding in this FTSE financial giant? appeared first on The Twelfth Magpie.

With a Self-Invested Personal Pension, the tax benefits come right at the start, in the shape of upfront tax relief on contributions. Here’s what each £100 invested a SIPP actually costs, depending on your tax bracket:

Better still, 25% of SIPP withdrawals are tax-free. However, the remainder may be subject to income tax. By contrast, there’s no upfront tax relief on an ISA. Instead, all withdrawals are tax-free. Splitting a retirement pot across these two tax wrappers helps investors manage income withdrawals to minimise their tax bills in retirement.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

So how big should your pot be?

Right now, a popular choice is to build a diversified spread of FTSE 100 shares that offer both dividend income and growth. So how much does an investor need to generate a monthly income of £997, which adds up to £11,964 a year?

The answer comes down to the yield on the portfolio. Under the so-called safe withdrawal rate, investors can take 4% of their pot each year, without eating into the underlying capital. If they can generate a 5% yield from a portfolio of higher-yielding FTSE shares, they can get the same income from a smaller pot. They’ll need even less capital with a 6% yield, as this list shows:

• 4% – £299,100
• 5% – £239,280
• 6% – £199,400

I can see some fabulous dividend yields on the FTSE 100 today. One of my favourite income stocks is wealth manager M&G (LSE: MNG), which I hold in my own SIPP.

Should income seekers consider M&G shares?

When I bought it in 2023, the yield was nudging 10%. Sadly, it’s not that high today, but a forward yield of 6.9% is still pretty excellent. So why has it fallen? It’s not due to any cut in the dividends. They’ve been climbing steadily, and the board aims to hike payments by a modest 2% a year. Instead, the yield has been compressed by the rising share price. It’s beaten my highest hopes, up 43% in the last year. Throw in that trailing yield and the total return climbs to 50%.

Investors shouldn’t expect the M&G share price to grow like that every year. This is more of an income play than a growth stock. If the stock market crashes due to Iran, it will take a beating too.

The board also has to keep finding new lines of business to generate the cash required to fund those shareholder payouts. But with a long-term view, I think this is a compelling income and growth opportunity. A spread of high income shares like this one can help investors maximise their passive income, whether in a SIPP or an ISA. Or better still, both.

The post How much do you need in an ISA or SIPP to target a £997 monthly income? appeared first on The Twelfth Magpie.

The Footsie has rallied over the last year, yet it’s still possible to pick up brilliant bargains. Many top companies still offer high dividend yields after years of underperformance. Others have declined sharply in value, in turn pushing their dividend yields to enormous levels.

Barratt Redrow (LSE:BTRW) and M&G (LSE:MNG) are a couple that have caught my eye. For this year, their dividend yields surge above the 3% FTSE 100 average. One of them is tipped to supercharge dividends over the near-to-medium term as well.

Want to know why they’re on my watchlist?

Multi-year lows

Things were looking pretty good for Barratt Redrow a few months ago, with interest rates falling and homebuyer affordability improving. But with the Iran war driving inflation higher, the Bank of England looks set to raise lending rates when more cuts had been anticipated.

The result is Barratt’s shares have toppled to 13-year lows. At these levels, I think the FTSE builder’s worth serious attention, despite the heightened risks. Its price-to-book (P/B) ratio — which values the share relative to balance sheet assets — has sunk to 0.4, below the value watermark of 1. That’s also miles below the 10-year average of 1.1.

I already have exposure to Barratt and the current dangers it faces. But given the massive dividend yields it’s also carrying, I think it’s still highly attractive from a risk-reward perspective. This is 5.7% for this financial year to June 2026, and 6.1% for fiscal 2027.

For this year, a reduced dividend is tipped by City analysts. But importantly, Barratt is cash rich following its merger with Redrow in 2024, and therefore looks in good shape to meet payout forecasts. Net cash is expected to be £550m-£650m at year’s end.

7.3% dividend yield

M&G isn’t expected to experience any dividend pressure, despite also being sensitive to inflationary and economic pressures. It enjoys a powerful combination of capital-light operations and reliable cash flows, which have delivered consistent dividend growth since 2019, when it split from Prudential.

With limited growth potential, M&G has put dividends and share buybacks at the centre of its capital allocation strategy. For this year and next, it means gigantic yields of 7.1% and 7.3% respectively. With a forward price-to-earnings-to-growth (PEG) ratio of 0.2 — also below the bargain watermark of 1 — it offers brilliant all-round value in my view.

So what are the risks of buying M&G shares? With cyclical operations, its share price can underperform during tough economic conditions. But I’m confident it will keep rising over the long term as the financial services market steadily expands. In the meantime, I can expect a steady flow of rich dividend income.

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That means with just £500, investors can instantly start earning a small but meaningful £34.05 passive income – roughly double what the average UK savings account offers today.

So is this too good to be true? Or are stock-pickers looking at a rare buying opportunity to lock in an impressive yield?

Why’s the yield so high?

A big reason why M&G has such a high yield is tied to its complex structure as a business. After being spun out of Prudential in 2019, the company formed two core operating divisions:

• Asset Management – creates and manages a range of investment funds covering stocks, bonds, real estate, and infrastructure.
• Life Insurance – manages a large number of life insurance policies and annuities.

Combined, these segments generate a lot of recurring revenue through management fees and insurance premiums. And the cash generative nature of this business model is how leadership has been able to raise dividends every year since its IPO almost seven years ago.

But this is where things get complicated. Because M&G doesn’t sit comfortably within the asset management or life insurance sectors individually, the group has to follow some pretty complex accounting rules. And it’s resulted in some whacky numbers, with net income swinging in and out of the red.

Understandably, this makes it much harder to understand exactly what’s going on under the hood. And for that reason, M&G shares have always traded at a relatively cheap valuation with a juicy dividend yield.

So does M&G’s dividend hold up?

Looking at the earnings per share, the group’s payout ratio’s an alarming 166% as per its 2025 full-year results. That means the company appears to be paying out 66% more than what it’s generating in profits – an immediate red flag of unsustainability.

But as previously mentioned, earnings are deceptive when it comes to M&G. What really matters is operating capital generation, which reveals the amount of actual money flowing into the business. When comparing dividends against this cash flow, the payout ratio drops to 63%.

In other words, the dividends are indeed covered, making today’s high yield seemingly sustainable, with enough wiggle room for even more payout growth if cash generation doesn’t deteriorate.

So how likely is this to happen?

What to watch

On the asset management side of the business, M&G remains almost entirely market-dependent. Downturns in the stock or bond markets negatively impact the group’s assets under management, lowering fees, as well as accelerating client outflows.

On the life insurance side, shifting legislation and lower returns on management actions are starting to apply pressure. And evidence of lower life insurance income has already started to creep into its results.

Put simply, this income stock is far from risk-free, and the high yield is a reflection of this.

The strong dividend track record suggests that a lucrative passive income opportunity exists here. Personally, there are far fewer complex businesses offering similarly high yields that are more tempting. But for dividend investors looking for hybrid exposure to the insurance and asset management sectors, M&G may be worth a closer look.

The post How £500 unlocks £34.05 passive income with this 6.81% yielding stock appeared first on The Twelfth Magpie.

Many people have wrestled with that question over the years – and they have not all ended up with the same answer!

Fortunately, the answer is basically not that much, in the grand scheme of things. A few hundred pounds would be ample.

Starting on a small scale and learning

In fact, I see some advantages to beginning modestly.

It can be quicker to get going if one does not need to spend years saving up the required cash, while life throws up other needs that require money.

Also, while everyone likes to think that they will start investing with a Midas touch, the reality is that there is a learning curve. Starting on a relatively small scale means that any beginner’s mistakes can be less costly than if more was at stake.

Choosing the right way to invest

Still, there can be some disadvantages too.

One is that costs such as platform fees, dealing commissions, and charges can eat into the money invested – especially if there is a minimum amount.

So it is important to look around when trying to find the most suitable share-dealing account, Stocks and Shares ISA, or trading app.

Learning some basic but important lessons

Even on a small scale, the basics of investing apply.

For example, no matter how good a company may be, it can run into unforeseen difficulties. So it is important to spread a portfolio across diverse shares. That can be harder to do cost-effectively when investing several hundred pounds than with a larger amount, but it is possible.

Also, valuation matters – not just finding good businesses. Long-term returns in investing are not just driven by the strength of the business, but also what you paid for your stake in it.

Following some Warren Buffett wisdom

I think many people could do worse than to start investing following some precepts of stock market legend Warren Buffett.

For example, he advocates sticking to businesses (and business areas) you understand, not being greedy, and building in a margin of safety when assessing how attractive a share price is.

Buffett also reckons many people should look no further than an index tracker when they start investing, but personally I think there can be merit in looking at individual shares.

One share I think is worth considering is FTSE 100 asset manager M&G (LSE: MNG).

This has some attributes of a classic Buffett approach. The market for asset management is huge and likely to stay that way. M&G has competitive advantages that help give it what Buffett calls a “moat“. Those include its strong brand, multinational operations, and a customer base in the millions.

I also find its dividend yield attractive. At 7%, it means someone buying M&G shares today will hopefully earn £7 per year for each £100 invested.

Dividends are never guaranteed at any firm, though. M&G faces risks and one is that choppy financial markets like we have seen lately could lead some investors to pull more money from its funds than they put in, hurting earnings.

Over the long term, however, I think this income share has ongoing potential.

The post Want to start investing in the stock market? Have a spare £200 or £300? appeared first on The Twelfth Magpie.

The usual definition of a crash is a 20% or more fall in value in a short timeframe. So a portfolio worth £1,000 could soon fall to a valuation of £800 – or lower.

But, as a long-term investor, just looking at the short-term ebbs and flows of the market does not interest me much. What is the bigger picture?

Learning from history

Let’s take a step back and consider a couple of the most recent stock market crashes.

One was the pandemic crash in 2020. Since then, the FTSE 100 is up 98%.

Before that came the financial crisis. From its low point in 2009, the FTSE 100 has risen 177%.

On top of that, investors in the index have been earning dividends along the way.

The current yield is 2.9%, but investors who bought during market slumps would be earning a higher yield even to this day if they held their shares. That is because yield is a function of dividends — and what an investor paid for the shares in question.

History does not necessarily repeat itself. But a key insight here is that, although the stock market suffered these crashes, it more than bounced back in the years that followed.

Is the big picture misleading?

Of course, focusing on the blue-chip index may not tell the whole story. After all, not all shares fare equally well during a stock market crash. Some may go to the wall altogether.

But the long-term performance data does point to some important truths.

The index rose considerably over time from the lows it hit during those crashes. It also ultimately rose above where it stood before them.

So, even if someone put £1,000 in before the crash and then saw their investment value crumble as markets tumbled (by almost 40% in 2009 and 30% in 2020), if they had been willing to hold on for recovery they would have seen their portfolio get back to where it had been when they invested – and later surpass it. This year has seen the FTSE 100 hit an all-time high.

This matters now, as always

That is a useful lesson when it comes to the value of taking a long-term approach to investing.

Nobody knows when the stock market will next crash. But I believe that no matter how bad that crash, over time a properly diversified portfolio of carefully chosen blue-chip shares ought to recover.

One share worth considering

One share I think investors eyeing market turbulence ought to consider for its long-term potential is M&G (LSE: MNG).

In 2020, the M&G share price fell several times to around £1.10. It is now close to £3 – and still yields 6.9%.

So an investor who bought back in March 2020 could now be earning a dividend yield of around 19%. Wow!

There were risks then, as now. As a financial services firm, M&G might see investors pull money from its funds if the market tanks. That could hurt earnings.

But with its strong brand in the asset management market, large customer base across multiple markets and deep expertise in the financial markets, I believe M&G has ongoing potential for the long term.

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