Traders in search of a second revenue from dividend-paying FTSE 100 shares generally need to sacrifice potential share price progress. Is {that a} trade-off price making?

To seek out the reply, I checked out funding supervisor M&G (LSE:MNG), which gives one of many highest yields on your entire FTSE 100, at 9.13% on a trailing foundation. 

Because it was hived off from blue-chip insurer Prudential in October 2019, floating at 225.2p a share, its shares have gone nowhere.

Actually, they’ve fallen 2.4% to as we speak’s 219.8p. Administration and buyers would have hoped for higher, however they’ve some compensation, within the form of dividends.

Underwhelming progress

A £10,000 funding in M&G on flotation day would have picked up 4,440 shares. These shares could be price £9,760 as we speak, a paper lack of £240.

However throughout these 5 years, M&G has paid out a complete of 111.7p per share in dividends. They might have totalled £4,959.

That’s virtually half the preliminary funding recouped in shareholder payouts. Add that to the present worth of the shares, and the stake would now be price £14,719. Not unhealthy going, contemplating the expansion no-show.

This implies revenue from dividends can nonetheless ship the products even when capital progress falls flat. Though in fact, few corporations supply dividends fairly as excessive as this one.

Again on monitor

M&G, like most companies within the monetary sector, has had a tough journey. The pandemic battered asset values, inflation and rates of interest have shaken markets, and currently we’ve had Donald Trump’s tariff volatility. 

As an energetic fund supervisor, M&G has additionally confronted brutal competitors from the rise of low-cost passive alternate traded funds.

However the enterprise isn’t standing nonetheless. It’s making a renewed push into bulk annuities administration and personal property — two areas with potential to drive future progress.

On 19 March, full-year outcomes confirmed M&G swung to a pre-tax lack of £347m in 2024, pushed by technical truthful worth changes.

Nevertheless, on an adjusted foundation, working revenue rose 5% to £837m, beating consensus estimates on account of robust progress in asset administration.

Crucially, working capital era got here in at £933m, which ought to help the dividend. M&G expects to generate £2.7bn in capital over the following three years and is aiming for five% progress in annual income by way of to 2027.

Whereas double-digit yields will be precarious, this one appears to be secure for now, however as ever, there aren’t any ensures.

Modest outlook

Shareholder payouts gained’t rise quickly. M&G’s ultimate dividend was lifted to 13.5p, taking the full for 2024 to twenty.1p. That’s an increase of simply 2% on 2023.

That modest fee of dividend progress may disappoint some, however that yield gained’t. Particularly when it’s been achieved in such a difficult setting.

M&G shares have risen 6% over the past 12 months and 13% within the final month alone, helped by rising market sentiment and Trump’s tariff climbdown.

Whereas volatility is prone to stay, the dividend could look much more tempting as rates of interest fall and drag down the revenue paid by money and bonds. This might attract new buyers.

I maintain the inventory and suppose it’s price contemplating shopping for as we speak. M&G reveals that even when progress is elusive, high-yield passive revenue shares can nonetheless pay their approach.