As bond yields have risen in latest months, many FTSE 100 shares have skilled weak spot. This has naturally pushed dividend yields up.
One inventory now providing an attention grabbing yield is M&G (LSE: MNG). With its share value down roughly 16%, its yield has jumped to six.9%.
M&G’s a number one financial savings and funding firm. Right this moment, it manages practically £400bn on behalf of over 4.2m prospects. Its shares are at present buying and selling for round 307p, down from a excessive of 367p in early August. That’s a big fall in slightly over two months.
The 2026 dividend forecast
Zooming in on the dividend, analysts at present count on a payout of 21.1p per share for the 2026 monetary 12 months. Divide that by the share value and also you get a 6.9% yield.
When it comes to dividend protection (the ratio of earnings to dividends), it’s anticipated to be about 1.34 occasions this 12 months. That’s slightly low however not a serious purple flag by way of dividend safety.
Bond yields are a danger
Now, it’s value stating that rising bond yields might current some challenges for this firm, as a result of larger bond yields imply decrease bond costs.
On condition that a big chunk of M&G’s property below administration (AUM) are in bonds, the corporate may very well be decrease AUM. This interprets to much less income and doubtlessly much less dividend development.
Dividends are not the one recreation on the town
One other challenge to pay attention to is that larger bond yields can cut back the attraction of dividend shares like this. This is because of the truth that when bond yields are excessive, buyers can get hold of first rate revenue returns from bonds with decrease ranges of danger.
Right this moment, it’s potential to choose up yields of 5%-7% from bonds with out taking over that a lot danger. So dividend shares like M&G aren’t the one recreation on the town for revenue.
Share value uncertainty
One factor that’s necessary to know is that bond yields might proceed to rise from right here. Just lately, analysts at fastened revenue big Pimco mentioned that we might see 6% on the 10-year US Treasury Yield (versus 5.2% now).
It is a danger to contemplate as additional energy in bond yields might push the M&G share value down additional. This might offset any dividend revenue an investor’s capable of get hold of.
A low valuation
On the plus aspect, the valuation’s fairly low at current. Taking a look at present earnings forecasts for 2027, the forward-looking price-to-earnings (P/E) ratio’s below 10.
That’s a comparatively engaging P/E ratio, for my part. That mentioned, analysts at JP Morgan simply reduce their goal value to 310p from 335p, so that they don’t see a lot potential for share value beneficial properties within the medium time period.
Strong H1 outcomes
One other optimistic is that M&G’s latest outcomes confirmed that the enterprise has been performing fairly nicely. For the primary half of 2026, adjusted working revenue was up 15% 12 months on 12 months. Wanting forward, CEO Andrea Rossi mentioned he was assured within the outlook for the second half of 2026. That’s encouraging.
An revenue alternative?
So are M&G shares value contemplating for revenue? I consider so. There’s no such factor as a free lunch within the funding world and the excessive yield does include dangers. Total although, I like the danger/reward skew.
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Edward Sheldon owns shares in JP Morgan.
