Over the past few years, owning shares in M&G (LSE: MNG) has been lucrative. The shares have actually fallen slightly since their 2019 listing, although by less than 1%. But the dividend yield is a juicy 8.9%. At some points over the past few years it has been well into double digits. Indeed, if I had bought in May 2020, my investment in the FSTE 100 firm would now be yielding 18%!
But how does the M&G dividend forecast for 2024 and beyond look?
Upwards momentum
The financial services firm has a dividend strategy of maintaining or growing its payout annually.
Is that guaranteed to happen? No. No dividend is ever a sure thing. However, the fact the stated strategy is to aim at least to maintain the dividend should help to focus management’s thinking.
Over the past few years, the company has been able to deliver on this goal. Last year saw the full-year dividend increase by 7%. A more recent interim dividend increase saw the payout grow 5%. So there has been positive momentum in the dividend lately.
Spare cash aplenty
On top of that, the company bought back half a billion pounds’ worth of its own shares over the past couple of years.
Why does that matter for the M&G dividend forecast? It shows the company has proven it has substantial cash generation potential. That could help fund the dividend.
But a buyback can also help dividends in another way. When a company buys back its own shares and cancels them, it means it has fewer dividends to pay.
That means it can increase the per-share dividend without spending any more money on them.
In fact, that is exactly what has happened at M&G. The most recent interim dividend cost it £1m less than in the prior year — even though the per-share dividend was larger.
Where things might go from here
What about the M&G dividend forecast? I think the interim raise gave an indication of what we are likely to see at the full-year level.
My expectation is an increase of around 5% compared to last year’s total. At the current share price, that implies a prospective dividend yield close to 9%. For a FTSE 100 company I regard that as high.
Looking ahead, I also think there could be more annual increases to come. The business benefits from a well-known brand, a customer base millions deep and spread across over two dozen markets, and also robust demand for asset management services.
There are risks, as with any share. Slowdowns in the economy could make investors nervous and hurt revenues and profits in some markets. Profit margins could also come under pressure from new entrants who want to build market share, like fintechs.
All things considered though, I remain upbeat about the outlook for the business. I am also optimistic about the M&G dividend forecast for 2024 and beyond. I plan to continue holding my shares.
