Revenue traders are at all times on the attention out for high-yielding dividend shares, notably these on the FTSE 100. These blue-chip shares sometimes have a strong stability sheet and excessive money stream, making dividends extra dependable. So when a brand new inventory took high spot for yields on the index, I needed to test it out.

An enormous yield

International funding supervisor M&G (LSE: MNG) not too long ago moved above Phoenix Group to safe its spot because the highest-yielding inventory on the Footsie. In late March, Phoenix fell under 10% for the primary time in a month as its share price rose sharply.

Now, M&G’s skilled the alternative — a sudden price dip that despatched its yield hovering. It additionally not too long ago introduced its last 12 months dividend, up 2% from final 12 months. Collectively, these elements sometimes make for a compelling funding case: a low price and excessive yield.

However there could also be extra to the story.

A dividend newcomer

The issue with dividends is that they’re by no means assured and could be minimize or decreased at any time. At the moment, M&G appears enticing as a result of its paying 20.1p on every £1.99 share. However dumping that a lot money on shareholders yearly comes at a excessive value — and when cash will get tight, dividends can get minimize.

That’s why it’s essential to test an organization’s observe report when searching for dividend shares. Corporations that adhere to a strict dividend coverage sometimes have at the least 10 years of strong development with no cuts.

Being a comparatively new firm, M&G solely has a six-year historical past of dividend development. I wouldn’t write if off fully — each high dividend payer has to start out someplace — but it surely makes it tougher to belief.

So let’s see if it may keep that development.

Danger and figures

A key subject M&G is going through recently is buyer outflows, which amounted to £1.9bn within the newest 2024 outcomes. That’s in stark distinction to the inflows of £1.7bn loved the 12 months earlier than.

This may occasionally partly be as a result of a lot of its pension fund purchasers are rebalancing capital from shares into bulk buy annuities (BPAs). This development is pushed by stubbornly excessive inflation amid an bettering economic system. If M&G can’t achieve extra publicity to this market, it could endure additional outflows.

But it nonetheless managed to report a 5% improve in working revenue in 2024 and reiterated its dedication to shareholder returns. It additionally elevated steering for 2025, elevating its cumulative financial savings goal by 15% from £200m to £230m.

With that form of confidence, I’d count on higher analyst rankings, however the common 12-month price goal is just 233p — a 16.7% rise. Nonetheless, JP Morgan put in an Obese score on the inventory final week with a price goal of 275p. That will equate to nearly a 50% capital achieve when including in dividends. Not a nasty return!

So regardless of the dangers, I believe M&G’s a inventory value contemplating for passive earnings in 2025. A yield above 10% is a uncommon discover on the FTSE 100, notably when backed by an organization with promising development potential.