Authorized & Common Group (LSE: LGEN) shares include one of the vital beneficiant dividends on the whole FTSE 100. They presently yield a shocking 8.74%, which can solely look extra enticing when rates of interest are minimize and financial savings charges and bond yields fall because of this.

If I locked cash away in a five-year financial savings bond I’d get a hard and fast price of round 4.25% immediately, roughly half the Authorized & Common yield. That’s down from 5.8% a yr in the past and is more likely to fall additional. Against this, Authorized & Common has simply hiked shareholder payouts 5%. The earnings is rising, not falling.

Dividends aren’t assured and my capital is in danger. Alternatively, I’ll profit if the share price grows.

FTSE 100 excessive yielder

Sadly, the share price is buying and selling at comparable ranges to a decade in the past (albeit with ups and downs alongside the best way). The corporate has change into a bit bloated and struggled to generate convincing progress.

But with the UK economic system rising after final yr’s short-lived recession, I see a glimmer of optimism. The shares are up 6.45% over one yr. Throw within the yield, and the entire return is 15.9%.

First-half outcomes revealed on 7 August confirmed income rising to £849m, a modest improve of simply 1% however higher than anticipated. The board expects 2024 core working earnings to develop by mid-single digits.

Authorized & Common has benefitted from a spike in annuity gross sales, as pensioners lock into a good quantity earlier than rates of interest fall. When charges retreat, annuity gross sales are more likely to reverse. That would weigh on future outcomes.

Nevertheless, this all that is short-term stuff. It’s the long run that issues. L&G is a stable blue-chip with a 188-year historical past. It now has two huge alternatives to develop the enterprise. First, within the fast-growing bulk annuity market, which includes taking up firms’ last wage schemes and managing them. Second, it’s concentrating on the mighty US market.

High blue-chip inventory

The dividend seems safe, with the group producing surplus money of £731m within the first half. The dividend per share has grown steadily over the past decade, with only one freeze through the pandemic. Let’s see what the chart says.

Chart by TradingView

The board plans to extend the full-year 2024 dividend by 5% however will improve payouts by simply 2% a yr up to 2027. That’s a disgrace however given immediately’s sky-high yield, I can reside with it.

Authorized & Common seems set to pay a complete dividend of 21.36p per share in 2024. I presently maintain 1,930 shares, which can give me a really welcome earnings of £412.

If I wished to extend that to £1,000 a yr, I’d have to up my stake to 4,682 shares. Which suggests shopping for one other 2,752. At immediately’s price of 231.9p, that will value me £6,382 (or £10,858 if I used to be ranging from scratch with no shares).

I don’t have fairly that a lot in my buying and selling account immediately, however once I do, I’ll improve my stake in L&G to bag that juicy earnings stream. With luck, I’ll get a little bit of share price progress too.