Once I purchase dividend shares I hope to get some share price development on high of the passive revenue they pay me. It doesn’t all the time pan out that approach although. 

I’ve had virtually no development from my favorite FTSE 100 dividend inventory, wealth supervisor M&G (LSE: MNG). I purchased its shares on three events over the previous yr, and a fast look at my on-line portfolio suggests I’m up a meagre 1.07% up to now.

I received’t be the one investor who’s underwhelmed. The M&G share price is up simply 4.57% over 12 months, whereas the FTSE 100 as a complete is up 11.51%. Over 5 years, M&G shares are down 10.84%. So why am I so keen on it?

The apparent reply is the dividend. Fairly merely, M&G shares include a stunning trailing yield of 9.75%. That smashes the FTSE 100 common of three.54%.

The dividend is unmissable for me

It’s a staggering fee of revenue. So staggering, that it makes traders suspicious. Sometimes, when yields head in direction of double digits, that’s an indication of bother. Yields are calculated by dividing the dividend by the share price. So when a inventory falls, the yield rises. A excessive yield can due to this fact recommend a struggling firm.

But I wouldn’t say that M&G is struggling. In full-year 2023 it posted a 27.5% enhance in pre-tax adjusted working revenue to £797m, beating consensus forecasts of £750m.

Regardless of that, the inventory plunged greater than 12% as traders had been upset by its meagre tenth of a penny dividend hike, from 19.6p to 19.7p.

They skilled additional ache within the first half of 2024, as adjusted pre-tax working income fell 3.8% to £375m. M&G additionally suffered £1.5bn in web outflows.

I’d bag some development too, someday

These two underwhelming outcomes have stored a lid on the share price. Nevertheless, I’m nonetheless getting an excellent second revenue, and I feel it appears to be like sustainable. I hope that current web outflows will quickly turn out to be inflows, when the inventory market shrugs off its newest bout of uncertainty and begins to recuperate.

Let’s see what occurs as soon as the Autumn Price range and US presidential election are out of the way in which. There’s a threat they might make issues worse although.

Whereas my portfolio reveals me I’m up simply 1.07%, it doesn’t mirror the influence of my reinvested dividends. As soon as included, they raise my complete return from M&G to a extra respectable 12.5%.

True, it’s not precisely Nvidia, however right here’s the factor. I purchase shares with a long-term view, which suggests a minimal 5 to 10 years, and ideally rather a lot longer.

M&G is forecast to yield 9.92% in 2024, rising to 10.2% in 2025. If right, that ought to raise my complete return north of 30% over the subsequent two years. Dividends aren’t assured but when that continues, I’ll double my cash in lower than eight years. And that’s assumes the M&G share price doesn’t rise in any respect. Think about if it does.