Image source: Getty Images
There are plenty of UK stocks competing for the title of 'best to buy now'. And, at least for me, some of the big dividends coming from financial stocks put them firmly in the lead.
9.1% investment manager offer M&G (LSE: MNG) looks like one of the best. And that's even after the share price has risen a bit. Not long ago, projected performance was in the double digits.
Top Financial stocks
I really like financial stocks most of the time. And when it seems like so many are getting hit, the contrarian in me wants to stock up on them.
That would weigh my stocks and Shares ISA a bit in one direction, of course. And I consider diversification to be a key element of long-term investing.
But then I remember something billionaire investor Warren Buffett said in 2016: “Every decade or so, dark clouds will fill the economic skies and briefly rain gold. When such downpours occur, it is imperative that we run out with washtubs, not teaspoons.“.
So maybe diversification can wait. And 2024 could be a year to fill my jar of financial stocks.
Best of the best
Right now I really like the look of Barclays, which I think is irrationally underrated. I also fancy a recharge on my Lloyds Banking Group either Aviva holdings.
But I don't own investment manager shares at the moment and that big M&G dividend could sway me.
It's not all plain sailing, though, after the company posted a loss in 2022. It looks like we should turn a profit by 2023. But the implied price-to-earnings (P/E) ratio of 16.5 isn't exactly a steal.
According to future forecasts, this figure should decrease. But there is another reason to be cautious.
Assets
In the first half, assets under management had fallen further. As of June 30, the total was £333 billion. That's down from £342 billion six months earlier. And from £349 billion in June 2022.
However, this appears to be mainly due to weak asset values. And we saw a net customer inflow of £700m in the half year.
Customer flows have been all over the place since the stock market crash of 2020. And that's a big cause of uncertainty right now.
panorama
But, in the first half, the board of directors said that the company was “We are on track to achieve our working capital generation target of £2.5 billion by 2024, and we are making good progress on our 2025 financial targets.“.
Could M&G really be the best FTSE 100 stock to buy right now? There is still a huge risk facing the entire sector. We do not know if we will reach an economic crisis in 2024.
Could the Bank of England's efforts to reduce inflation go too far and lead to a harsh recession? Until we know the answer, I think financial stocks could remain weak.
Still, I'm not sure which one is the best. FTSE 100 shares at the moment, but M&G could be in the top three of my watchlist.