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Phoenix Group (LSE:PHNX) has confirmed to be one of many FTSE 100‘s finest dividend shares throughout the previous decade. It even continued to lift shareholder payouts throughout the Covid-19 disaster when different blue-chip shares had been chopping, cancelling and suspending dividends.
The Footsie’s residence to many nice dividend development shares. Sage Group, Ashtead Group and Halma are only a few blue-chip shares with lengthy information of unbroken payout development.
Nevertheless, these firms don’t supply the market-mashing dividend yields of Phoenix shares. These finally rise by means of 10% over the medium time period, because the desk beneath exhibits.
| Yr | Dividend per share | Dividend development | Dividend yield |
|---|---|---|---|
| 2024 | 54p | 3% | 9.9% |
| 2025 | 55.7p | 3% | 10.2% |
| 2026 | 57.3p | 3% | 10.5% |
The prospect of constructing a FTSE 100-beating dividend earnings over the interval is tantalising to me. The typical ahead yield for Footsie share sits method again at 3.5%.
However dividends are by no means assured, and I want to contemplate how life like these forecasts are. I have to additionally take into account different elements that impression Phoenix’s funding case. Large dividends may depend for nothing if the corporate’s share price plummets.
Right here’s my view of the monetary providers mammoth.
Unhealthy omen
To be trustworthy, my first tackle Phoenix’s dividend prospects isn’t an encouraging one. I’m dividend cowl, which signifies how properly predicted payouts are lined by anticipated earnings.
Like dividend forecasts, income estimates may miss their mark. So a studying of two instances and above gives buyers with stable safety.
Within the case of Phoenix, predicted earnings of 44.9p per share for 2024 are literally decrease than the anticipated dividend per share of 54p.
The connection switches from subsequent yr, however dividend cowl of 1 instances and 1.1 instances for 2025 and 2026, respectively, is much from strong.
Good omen
That stated, I wouldn’t say Phoenix’s poor dividend cowl is a dealbreaker. Earnings per share have often surpassed dividends in recent times, however this hasn’t hampered the corporate’s potential to pay an enormous and rising dividend.
Previous efficiency isn’t a dependable information of the longer term. However a look at Phoenix’s steadiness sheet fills me with optimism.
As of June, its Solvency II capital ratio was 168%. This was properly inside the corporate’s goal of 140% to 180%.
Phoenix is a cash-generating machine. And as a possible investor I’m inspired by its potential to often meet — and even beat — its money creation targets.
Robust money technology within the first half, for example, led the agency to assert “we are confident of delivering at the top-end of our £1.4bn to £1.5bn target range in 2024.”
A high dividend share
As a consequence, I’m fairly upbeat on Phoenix’s dividend forecasts for the following few years. My primary concern is whether or not its share price may wrestle by means of to 2026. Powerful financial situations and the ever-present risk of market volatility may adversely impression the enterprise.
Nevertheless, as a long-term investor this isn’t a dealbreaker for me. I imagine that Phoenix’s share price will rise steadily over time as demographic modifications drive demand for retirement merchandise. I really suppose it may rise in worth as rates of interest fall.
And within the meantime, I may sit up for extra juicy dividends. This can be a share I’ll critically take into account after I subsequent have money spare to speculate.