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Asset manager M&G (LSE: MNG) and insurance conglomerate Phoenix Group Shares (LSE:PHNX) are my two favorites FTSE 100 Index Dividend-earning stocks. After today's stock market crash, I like them even more.
A quick look at either company will reveal why I'm a fan: both offer mind-blowing income levels.
M&G offers a yield of 10.22% per annum and Phoenix offers an even more generous passive income of 10.31%. In the FTSE 100, only Vodafone Group offers higher returns, but that won't last. The telecoms giant will halve shareholder payouts in March 2025.
Why do I like M&G?
Yields are calculated by dividing the dividend per share by the share price. So when stocks fall, as is happening now, the yield rises. It's simple math.
This also highlights a problem: M&G and Phoenix pay out so much income because their shares have performed so poorly.
In one year, M&G’s share price is up just 3.58%. That’s behind the FTSE 100 as a whole, which is up 5.12%. Phoenix fared worse, falling 0.75%. This is not an isolated fall. In three years, they are down 13.25% and 22.73% respectively.
UK financial stocks have been out of favour for some time now. This is partly due to high interest rates. Investors can earn 5% a year in cash or bonds, risk-free. While M&G and Phoenix offer much higher returns, capital is at risk, as with any stock.
Personally, I'm not worried about that. I buy stocks like these with a long-term view. I expect both companies to prosper over time, giving me far more income and growth than any savings account or government bond. Though with far more volatility along the way.
The first important question is whether their dividends can survive. Once a yield exceeds 10%, you're in the danger zone. Just ask Vodafone investors. However, I'm betting these two will.
The Phoenix Group can also fly
The M&G board has clearly set out its policy of “deliver stable or increasing dividends to our shareholders”I think the dividend is likely to remain stable, but growth may be meagre. The board increased the dividend per share by just 0.1p to 19.7p in 2023. The markets didn't like that and the share price bore the brunt of their discontent. Given the huge yield, I'm in a more forgiving mood.
Phoenix has had a solid dividend track record of late, having increased shareholder payouts in seven of the past nine years. In the other two years, it froze them. One of those years was the pandemic, so that's pretty forgivable. Let's see what the chart says.
TradingView Chart
Dividend growth may slow, but I won't be crying into my pillow if that happens. What I don't want to see is a dividend cut. That would probably torpedo their share prices as well. I don't think we will, but who knows?
It makes my day every time their dividends hit my self-invested personal pension fund (SIPP). If I can find cash, I'll take advantage of the market tantrum and buy more of both.
