Every time I take a look at this breathtaking FTSE 100 dividend inventory, I assume I have to be lacking one thing.

The corporate in query is insurance coverage conglomerate Phoenix Group Holdings (LSE: PHNX). The rationale I can’t fairly imagine my eyes, is that it yields a thumping 9.68%, one of many highest dividends round.

The rationale I assume I’m lacking one thing is that buyers aren’t piling in to reap the benefits of this huge revenue alternative.

FTSE 100 revenue hero

The Phoenix share price has crashed 22.09% over 5 years. Over 12 months, it’s down 1.67%. Don’t buyers like dividends anymore?

I like dividends, particularly huge fats juicy ones like this. But I’m not daft, I do know shareholder payouts can turn into extremely susceptible as soon as yields hit this insane stage. Little question many buyers worry the board shall be compelled to chop in some unspecified time in the future, and the shares will fall consequently.

But Phoenix really has a strong monitor file of dividend per share development, as my desk exhibits.

Whereas the board froze the dividend in 2016, and once more in 2020 in the course of the pandemic, usually it has hiked them yearly. 

Dividends received’t survive until corporations generate the money to pay them. Final yr, Phoenix set itself a goal of producing £1.8bn of money. It made £2bn.

Markets appear assured of additional dividend development, with the yield forecast to hit 9.93% this yr, then 10.2% in 2025. Like I mentioned, breathtaking. That’s double the revenue I might get on an easy accessibility financial savings account immediately.

Phoenix Group could lastly rise

The hole will widen when the Financial institution of England lastly begins chopping rates of interest, which might occur as early as tomorrow’s 1 August assembly.

Investing in shares is all the time riskier than leaving cash within the financial institution, as a result of capital is in danger. But on this case, I believe the rewards outweigh the dangers. Particularly since Phoenix has a strong stability sheet, with a Solvency II capital ratio of 176%. That’s close to the higher finish of its 140% to 180% goal vary.

It’s working in a aggressive market, as rivals embody FTSE 100 giants Aviva and Authorized & Common Group. The sector has been hit as rising inflation drives up claims prices, whereas lowering the worth of the a whole lot of billions they maintain in property to cowl liabilities. All three provide excessive yields immediately, as their share costs have floundered.

Sure that’s altering. The Phoenix share price is up 10.66% over the past three months. Are buyers lastly waking up to the chance?

I purchased Phoenix shares in January and once more in March. I’m up simply 5.33% however I’ve additionally obtained two dividend funds. After re-investing these, my whole return is 14.22%.

These are early days, and I believe there’s much more to return. Even when its share price restoration is postponed once more, I’ve nonetheless bought the revenue. If extra folks come spherical to my mind-set, Phoenix might fly. I’ll purchase extra in August, in case it does.