This year’s stock market crash has been a disaster for dividend investors, with around half of FTSE 100 firms scrapping their payouts. Not all of them have called a halt to their dividends, though. I’ve found two that continue to offer super generous yields of around 7% a year.
Insurance consolidator Phoenix Group Holdings (LSE: PHNX) is one of my favourite stocks on the FTSE 100 index. It is underpinned by a solid business proposition. Basically, it buys up old life insurance and pension funds that are closed to new business, and manages them on behalf of members. The more it buys, the greater the economies of scale.
The Phoenix share price was unfairly hammered during the March stock market crash but has mounted a solid recovery, climbing 20% in the last three months. The main attraction is its dividend. Right now, it yields 6.93%.
Phoenix rises from the stock market crash
That payout looks pretty secure, with management today announcing “strong” first-half cash generation of £433m, up from £287m last year. Cash generation was boosted by the recent acquisition of Swiss Re AG’s UK unit ReAssure. Phoenix is able boast a winning combination of “cash, resilience and growth”, something few other companies can say right now.
In a further sign of its resilience in the stock market crash, the group’s Solvency II surplus climbed from £3.1bn at the end of last year to £4bn on 30 June. Its shareholder capital coverage ratio climbed from 161% to 169% over the same period.
Group operating profit grew 11% to £361m. While the Phoenix share price is unlikely to shoot the lights out, its generous dividend should keep them burning nicely. A rare ray of hope amid today’s dividend darkness.
Another top FTSE 100 dividend stock
The M&G (LSE:MNG) share price has recovered at an even faster pace after being caught up in the stock market crash. It is up 33% over the last three months. Once again, it combines financial strength with a meaty dividend. Right now, M&G yields 7.22%. Who says you cannot generate income from FTSE 100 stocks these days?
The FTSE 100 newcomer has a solid shareholder Solvency II coverage ratio of 168%, and affirmed its commitment to continue paying dividends. As with Phoenix, the investment manager has not put any staff on furlough or tapped into government support.
While the pandemic has not completely passed these companies by, it has certainly left them relatively unscathed. Assets under management at both companies will fell in the stock market crash, again, the damage was minimal.
M&G also operates a closed fund, the Prudential UK life insurance and annuity book, which generates steady cash flows. It is aggressively seeking out new growth opportunities, buying a wealth management platform from Ascentric, which has £14bn of assets under management. Last month, it launched a £183m bid for home loans platform UK Mortgages.
It’s hard to believe that you can buy two solid FTSE 100 stocks yielding 7% right now, but you can. And I would.