I’ve just been handed a list of the top 10 popular shares among AJ Bell investors in 2024 and was pleased to see UK income stocks feature heavily.
I wasn’t surprised to see US chipmaker Nvidia at number one. Or that corporate Bitcoin holder MicroStrategy, Warren Buffett’s vehicle Berkshire Hathaway and Microsoft all made the top 10.
But I was surprised to see FTSE 100-listed insurer Legal & General Group (LSE: LGEN) in third place. I was even more surprised to see Phoenix Group Holdings in fifth and wealth manager M&G (LSE: MNG) in sixth. Yet I shouldn’t have been. I hold all three myself.
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I should mention that FTSE 100 oil giant BP is in second place, which gratifies me because I bought its shares twice recently. But that’s for another article.
UK investors can’t resist M&G’s juicy dividend
Despite the allure of the US tech giants, investors continue to appreciate the value of a top UK dividend stock. The fabulous three FTSE 100 high-yielders are outselling US tech mega-caps Amazon, Meta Platforms and Apple, none of which make the top 10.
| Most popular shares with AJ Bell’s DIY investors in 2024 |
| Nvidia |
| BP |
| Legal & General |
| MicroStrategy |
| Phoenix |
| M&G |
| Berkshire Hathaway |
| Applied Nutrition |
| Microsoft |
| CleanSpark |
It’s not hard to see the appeal. Today, M&G has a trailing yield of a blistering 9.93%. That’s almost triple the FTSE 100 average of 3.5%. Legal & General isn’t far behind yielding 8.85%. Incredibly, Phoenix trumps them both, yielding 10.22%.
While this is a stunning rate of passive income, share price performance has been poor. Over the last 12 months, the M&G share price has fallen 7.78%. Worryingly, it’s also down 18.14% over five years.
Similarly, Legal & General shares have fallen 4.01% over one year and 23.94% over five. Phoenix shares may be up 4.39% over 12 months, but over five years they’re down 28.96%. ISA investors may be wondering if they made a mistake.
These FTSE 100 dividend stocks will rally one day
It’s no fun earning a heap of income if your capital keeps shrinking. Especially if the boards decide those sky-high dividends are unsustainable, and cut shareholder payouts.
So why are they struggling? Let’s take M&G as an example. It’s had a tough year, as today’s higher interest rates make servicing its £8bn net debt pricier.
CEO Andrea Rossi recently complained of a “challenging market environment”, which led to £1.5bn in net first-half outflows. Pre-tax operating profits fell 3.8% to £375m.
The good news is that the dividend looks secure, with M&G lifting its capital generation forecast to £2.7bn. When interest rates finally slide, M&G’s supersized yield will look even more attractive as yields on low-risk cash and bonds decline. Its shares may rise as investors dive in. No guarantees though.
I think that moment is worth waiting for. While I wait, I’ll get that whopping income. Holding these three high income stocks is a risk, but I don’t think it’s a mistake.
