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Dividend inventory Phoenix Group Holdings (LSE: PHNX) is lastly getting among the consideration it deserves.
Whereas many UK shares have been hammered by Donald Trump’s tariff threats, FTSE 100 dividend shares have escaped the worst of the volatility. Some have even made good points. Phoenix is considered one of them.
Its shares are up 8% in per week and 22% over 12 months. Not unhealthy for a corporation usually dismissed as a boring back-office insurer. With a price-to-earnings ratio of simply 12.75, the shares nonetheless look moderately priced.
Can the share value climb larger?
Phoenix runs a strong, regular enterprise. It acquires closed life insurance coverage books, the type different corporations now not need to handle, and runs them down effectively, benefitting from economies of scale.
It’s not flashy, however it works. To broaden its earnings base, it has expanded into pensions and retirement merchandise. Working in a mature sector, it’s unlikely to set the market alight, however that’s not the attraction right here.
This inventory is all about earnings. The trailing dividend yield stands at a chunky 9.33%. At that fee, the dividend alone might double an funding in underneath eight years. Any capital progress comes on high.
In fact, a yield this excessive raises eyebrows. In right now’s local weather, many will rightly marvel if it’s sustainable. However Phoenix has a good monitor file. It’s elevated its payout in eight of the final 10 years, and newest outcomes recommend it’s in fine condition.
In 2024, Phoenix generated £1.4bn in working money. That’s up 22% yr on yr and two years forward of schedule. It’s now concentrating on £5.1bn over the three years from 2024 to 2026, up from the earlier £4.4bn.
The corporate additionally repaid £250m of debt final yr, plus extra in February. The board’s purpose now could be to chop leverage to round 30% by the top of 2026.
Earnings right now, potential progress tomorrow
The ultimate dividend for 2024 was lifted 2.6% to 27.35p, taking the full-year payout to 54p. The subsequent instalment arrives on 21 Could. I’ll be preserving an eye fixed out for it, since I maintain the shares.
Naturally, there are dangers. Phoenix manages round £280bn in property, and unstable markets might dent that, even with hedging. It additionally depends closely on disciplined capital administration. If buyers ever sense the dividend is underneath risk the share value might endure. If it’s frozen or lower, that may harm. Given the corporate’s constant supply, that danger appears value taking.
Phoenix gained’t woo the expansion crowd. US tech giants have stolen the limelight for years, and with money and bonds providing 5% yields recently, many earnings buyers have performed it secure.
However sentiment might shift. Overpriced tech is already feeling the Trump impact. And when rates of interest fall, Phoenix’s dividend might look even higher.
It’s a tortoise, not a hare. However in these jittery markets, that is likely to be precisely what’s wanted for me to win the race.
