Until a few years ago, I wasn’t really interested in receiving passive income from a dividend stock. I was focused on building up my portfolio almost entirely through growth shares.
As the grey hairs started to accumulate though, I grew partial to a dividend. Though, I wouldn’t go as far as oil magnate John D. Rockefeller, who purportedly said: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
When growth stocks take a tumble, as they are doing now, thanks to tariff fears, then at least I can console myself with the possibility of dividends. I can use the cash to either add to my growth stocks while they’re down or reinvest back into dividend shares to aim for higher income.
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Moreover, it’s a bit of a myth that the share prices of dividend stocks don’t go anywhere. Looking at the four high-yield FTSE 100 stocks in my portfolio, three of them performed strongly on a total return basis (dividend and share price) last year.
| 2024 total return* | Dividend yield | |
| Aviva | 15.7% | 6.5% |
| British American Tobacco | 35.7% | 7.5% |
| HSBC | 33.7% (includes special dividend) | 5.9% |
| Legal & General | -0.2% | 8.8% |
A double-digit yield!
As a result, I would be willing to add another dividend stock to the mix, assuming I can find one that appears suitably attractive. Enter M&G (LSE: MNG), the asset management firm that demerged from Prudential in 2019.
At its current share price, M&G is sporting a mouth-watering 10% dividend yield. This means it’s the highest-yielding stock in the FTSE 100.
But this also makes me nervous because previous ultra-high yielders have ended up cutting their payouts. For example, the yield on Vodafone shares was above 11% a year ago, the highest in the Footsie. Then the telecoms giant slashed its payout by 50%!
This makes me wonder if the market is assuming a big M&G dividend cut is on the horizon (always a possibility).
Increasing market mayhem
Then again, just back in March, the firm said: “Given our confidence in the outlook of M&G, I am delighted to announce that today we are moving to a progressive dividend policy, starting with a 2% increase for the 2024 total dividend per share.”
This doesn’t sound like a big reduction is imminent, though M&G is somewhat at the mercy of investor sentiment. This is being severely tested at the moment, with President Trump’s tariffs causing mayhem.
Last year, M&G saw fund outflows, though this was offset by positive market movements. Between 2025 and 2027, it aims to grow adjusted pre-tax operating profit by 5% or more per year, and to generate £2.7bn of operating capital.
However, as I type, Goldman Sachs has just raised the probability of a US recession to 35%, up from 20%. So rising levels of investor angst could lead to M&G fund outflows and lower profits. This is a concern I have here.
My decision
Weighing things up, I’m undecided whether this is the worst or perfect time to invest. What I’m tempted to do then is add shares to my portfolio every three months to work my way into a position this year.
This should reduce risk, while also allowing me to take advantage of the huge 10% yield currently on offer.
