Up 15% in a month and still yielding 9.5% – this FTSE second income stock is on fire!

The FTSE 100 is crammed stuffed with shares that can provide traders a sensible second income stream with out working for it.

That’s the magic of dividends. No sweat, no shifts, no onerous graft – simply decide the Shares and Shares ISA platform, decide the stock, and let the enterprise do the heavy lifting. 

Ideally, I like to depart my income shares alone. I don’t examine their share costs every day. Compound income and development can work wonders, however want time.

Wealth supervisor M&G (LSE: MNG) is one among my favorite passive income holdings. It’s providing a whopping 9.5% dividend yield. That’s greater than double at the moment’s greatest purchase money financial savings charges. 

The distinction is that my capital is on the road, and that’s one thing traders must be snug with.

Money rolling in

Like nearly each different stock, M&G was hit by the latest jitters round Donald Trump’s commerce tariffs. 

With £346bn of property below administration, market shocks like this are by no means welcome. They will additionally delay new purchasers from investing, denting future inflows.

As tensions ease, M&G shares are crimson sizzling, up 15% in a month. They’ve now recovered from the latest dip. Over 12 months, the achieve is a extra modest 6%, with that juicy dividend on high.

Ignore the noise, and the enterprise is pushing on. On 19 March, M&G posted a loss earlier than tax of £347m, however that was largely all the way down to truthful worth changes. 

Adjusted working revenue, which most traders focus on, rose 5% to £837m. That beat expectations and was pushed by a 19% leap in asset administration earnings.

Gradual development hope

Working capital technology got here in at £933m, which is vital as that helps the dividend. The entire payout was elevated, however solely by 2% to twenty.1p. My subsequent dividend ought to land in my buying and selling account this Friday (9 Might). All the time a joyful day and clearly, I’ll mechanically reinvest it to purchase extra M&G shares.

After all, there are dangers. M&G hasn’t precisely smashed it since demerging from Prudential in October 2019. As an energetic fund supervisor, it faces an ongoing battle towards low cost and passive trade traded funds (ETFs).

The group is tiptoeing again into the majority annuity market, however it’s a comparatively small participant. There’s additionally a contemporary cost-saving drive below method, with a new £230m goal for 2025.

There’s stress to maintain delivering, because the yield is the primary cause many traders are right here. Any dividend lower could be a blow, each to income and the share value. Given M&G’s capital power and money technology, I’m hopeful that gained’t occur.

Loving these dividends

The 11 analysts serving up one-year share value forecasts have produced a median goal of 232p. If right, that’s a modest improve of slightly below 10% from at the moment. Mixed with that yield, this would give a whole return of virtually 20% if true. Naturally, forecasts can’t be relied on.

The place the worth goes over only one 12 months is neither right here nor there to me. I plan to carry for a lot longer than that. 

The M&G share value could also be on hearth at the moment, however over the long term it’s extra of a gradual burner. Which is high quality by me.