ii view: FTSE 100 dividend king M&G pursues three-pronged approach

This FTSE 100 asset manager offers one of the biggest yields around and the share price is up 4% year-to-date. Buy, sell, or hold?

First-quarter trading update to 31 March 2023

• Assets Under Management and Administration (AUMA) up 0.6% from year-end to £344 billion
• Capital cushion or Solvency II coverage ratio of 200%, up from 199%

Chief executive Andrea Rossi said:

“M&G started the year building on our strong momentum from 2022. Looking ahead, I'm both confident and excited about the prospects for M&G, as we execute on the strategy outlined at Full-Year Results.  I am enthused by the progress to date and remain focused on delivering operational efficiencies to benefit both clients and shareholders.”

• Invest with ii: Top UK Shares | Share Tips & Ideas | Cashback Offers

ii round-up:

Previously separated out of Prudential (LSE:PRU), M&G Ordinary Shares (LSE:MNG) today manages money for around five million retail clients and more than 800 institutional clients in both the UK and Europe. 

Its brands include both M&G itself and Prudential brands. 

For a round-up of theses latest results announced on 8 June, please click here. 

ii view:

M&G is a savings and investment business. It operates across the three divisions of Asset Management, Wealth and Savings including Prudential with-profit products and Heritage taking in historic Prudential savings policies and annuities. Its relatively new strategy now sees its targeting business growth, a simplification of its operations while retaining financial strength. Its many competitors include Schroders (LSE:SDR), Man Group (LSE:EMG) and Ashmore Group (LSE:ASHM). 

For investors, higher interest rates may see some clients switch savings towards bank deposits. A cost-of-living crisis could also see customers sacrificing savings to pay increased energy and mortgage bills. Competition across the asset management industry remains intense, while M&G’s adjusted operating profit before tax fell by just over a quarter during its last financial year. 

• The Income Investor: buy these unpopular shares for high yield and growth
• How your portfolio will be impacted if higher interest rates endure
• Five of AIM’s most attractive dividend stocks

On the upside, AUMA rose slightly over this latest quarter. Its fund performance remains well-honed, with 68% of its mutual funds ranking in the upper two performance quartiles over one year and 75% over three years as of March. A £200 million cost cutting programme is now being pursued including a rejig of office space and staff numbers, while the company returned nearly £1 billion to shareholders via dividends and share buy-backs in 2022.

On balance, and with the shares on a forecast dividend yield of 10%, income investors at least are likely to remain fans. 

Positives: 

• Cost cutting initiatives
• Attractive dividend payment (not guaranteed) 

Negatives:

• Uncertain economic and geopolitical outlook
• Intense competition

The average rating of stock market analysts:

Strong hold