Because it was spun off from Prudential in 2019, M&G‘s (LSE:MNG) shares have been an distinctive supply of passive revenue for buyers.

Annual dividends have risen yearly since then, even throughout the pandemic. In 2024, money rewards have been lifted 2% to twenty.1p per share, beating payout progress throughout the broader FTSE 100.

Not solely this, however dividend yields for the monetary companies large have additionally comfortably crushed the Footsie’s long-term common (of three% to 4%) since 2019:

However previous efficiency isn’t all the time a dependable information to future returns. And with the worldwide economic system softening as commerce tariffs chew, M&G’s proud dividend document might expertise some squeeze if income stoop.

Right here, I’m wanting on the Metropolis’s dividend forecasts via to 2027. I’m additionally questioning whether or not M&G is, on steadiness, a prime FTSE 100 inventory to contemplate.

Double-digit dividend yield

Regardless of rising macroeconomic uncertainty, forecasters are assured that the FTSE agency will proceed delivering beneficiant dividends over the following few years.

Their estimates might be seen under:

Firstly, dividend progress is tipped to outstrip the 1.5% to 2% predicted for blue-chip common within the close to time period. And payout will increase are anticipated to select up steam over the interval.

Secondly, dividend yields are additionally anticipated to stay comfortably above the FTSE 100’s historic common.

But dividends are by no means assured, and particularly within the present local weather. So it’s vital to contemplate how sturdy these estimates are.

Sadly, issues aren’t as safe as I’d ideally like, at the least based mostly on dividend cowl. For the following three years, dividends are coated between 1.2 instances and 1.3 instances by anticipated earnings. Each figures are under the broadly regarded security benchmark of two instances and above.

Ought to buyers purchase M&G shares?

Does this make M&G shares a possible dividend entice, then? ‘Not at all’ is my frank opinion.

Whereas greater dividend cowl is preferable, the FTSE firm’s managed to maintain paying massive and rising dividends regardless of beforehand poor readings (and even intervals of losses).

With a powerful steadiness sheet, I’m assured that M&G can meet the Metropolis’s wholesome dividend projections. Its Solvency II capital ratio was 223% as of December, its sturdy money circulation driving a 20% year-on-year enchancment.

The corporate’s anticipating money era to stay sturdy over the forecast as nicely. It’s focused cumulative working money era of £2.7bn via to 2027.

This could give M&G the ammunition to take a position for progress alongside paying extra massive dividends. Given the massive progress potential throughout its product segments, I’m optimistic this might result in substantial passive revenue and share price features.

All issues thought of, I feel M&G is value critical consideration, and particularly at present costs. In addition to having these dividend yields, its shares additionally commerce on a low price-to-earnings (P/E) ratio of 9.1 instances.