I’m all the time on the hunt for a cut-price inventory providing a juicy dividend yield, and one simply caught my eye.
On-line buying and selling platform IG Group Holdings (LSE: IGG) is well the worst FTSE 100 performer over the previous three months, plunging 43.5%. That’s twice as unhealthy as the subsequent worse (Rentokil Preliminary, down 21%).
The IG share worth was flying initially of the 12 months as markets turned extra risky and buying and selling picked up. So is that this quickfire dip a shopping for alternative, or a warning to remain away?
Right here’s why the inventory plunged
IG has been hit by a double dip. First, after the board introduced its $1.3bn acquisition of US prediction-markets enterprise Underdog on 30 July. IG is eager to develop past its conventional buying and selling operations, however the deal brings baggage of execution and regulatory uncertainty.
IG’s buying and selling replace (2 October) dealt the subsequent blow as administration warned that Q3 income would fall round 14% 12 months on 12 months to £240m.
The board additionally minimize its 2026 income development forecast from between 10% and 15% to mid-single-digits, blaming much less supportive market situations and a fall within the proportion of buying and selling earnings it retained.
IG Group earns extra when markets are risky and shopper buying and selling soars. However it revamped its technique in 2025, protecting extra buying and selling earnings from shoppers in-house by reducing hedging prices. Sadly, this left it extra uncovered in calmer market situations, when shoppers commerce much less aggressively.
The restoration case
Prior to now, I’ve been too fast to purchase shares after a pointy dip like this, so I’m approaching with warning. But there are positives. New buyer exercise stays robust, with natural first trades up 25% in Q3. First-half outcomes (30 July) confirmed income rising 18% to £642.8m.
Dealer forecasts recommend the shares may get well sharply. One-year forecasts from 9 brokers produce a consensus goal of 1,448p. That will symbolize a shocking 50% acquire from as we speak’s 968p. Nonetheless, I’m involved that a number of of those could have been revealed earlier than the October hunch, and will not replicate all of the unhealthy information.
That mentioned, dealer Jefferies reiterated its Purchase ranking and 1,200p goal on 19 October. It was upbeat concerning the Underdog buy, and in addition highlighted the core operational and margin benefits of IG Group proudly owning its personal dealer, change, and clearing infrastructure.
IG’s Capital Markets Day on 22 October was broadly effectively acquired, with dealer UBS backing the group’s effectivity drive and sustaining its Purchase ranking with a reiterated 1,425p goal.
Revenue at a discount worth?
The forecast dividend yield for 2026 is round 5%, which is fairly first rate. The worth-to-earnings ratio has fallen to only 4.6, effectively under the FTSE 100 common P/E of round 15. That represents deep discount territory.
IG Group is a vastly tempting restoration inventory, nevertheless it’s additionally dangerous. Whereas I’m tempted, I’m ready to see whether or not Underdog buy actually comes off earlier than I’ll contemplate shopping for it.
For buyers looking for a fair greater dividend earnings, this FTSE 100 dividend inventory yields virtually 7%…
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Harvey Jones doesn’t maintain any positions within the corporations talked about.
