The Phoenix share price has surged in recent weeks after the company recorded profits for 2021. While it might not offer ample growth, the stock yields a high dividend and could be strong resource for investors seeking to weather prevailing uncertainty.
Like its mythical namesake, Phoenix Group’s [PHNX.L] share price has risen from the ashes of late, up 11.3% over the past month. Helping things has been a growth in free cash flow, new business and profitability.
The stock also carries a handsome dividend — a rare find in these uncertain times.
Though it is unlikely to offer investors growth opportunities, with the market outlook remaining uncertain, the Phoenix share price and the accompanying dividend could be a stable option in a period of heightened volatility.
What’s happening with Phoenix Group’s share price?
Over the past month Phoenix Group’s share price has gained 4%, closing Wednesday 1 June at 633.4p. The stock is still some way off 18 January’s 701.4p close, but shareholders will be relieved that it’s not trading around the 570p levels seen in early May. Over the 12-month period, Phoenix’s share price is down 14% and the hope will be that it can fly back to plus 700p levels in the medium to long term.
Why investors care about the Phoenix Group dividend
For those looking for a passive income, shares in Phoenix Group come with a hefty 8% yield. In 2021 the dividend came in at 48.9p, up from 47.5p the year before. In Phoenix Group’s 2021 full-year results, it's worth noting that the insurer said that the “board pays a dividend that is sustainable and grows over time”.
Phoenix makes its money through generating new business under its Standard Life brand — what it terms organic growth. It also has a heritage or in-force, which provides cash and resilience. Then there is its inorganic M&A business. The heritage business provides a stable dividend over the long term, while the other two provide dividend growth as they grow.
In 2021 the insurer delivered record cash generation of £1.7bn, exceeding its forecast of between £1.5bn and £1.6bn. Its open business delivered record new business long-term cash generation of £1.18bn, an increase on 55% from 2020.
“This strong financial performance means that we have once again exceeded our public financial targets. As a result, I am delighted that the Board is recommending Phoenix Group’s inaugural organic dividend increase of 3%,” wrote group chief executive Andy Briggs in Phoenix’s 2021 annual report.
Briggs added that “the Board has always been clear that an organic dividend increase would only be implemented if the increased level of dividend remained every bit as sustainable over the long term as it previously was. Owing to the growth in our business, that is the case in 2021.”
As a mature business, Phoenix’s Group probably may not offer investors gangbuster growth. But perhaps that’s not the point. In a time when growth stocks are taking a bettering, Phoenix’s dividend could provide investors with some stability.
And as the stock is still down from pre-pandemic levels, there could still be some upside left in Phoenix’s share price.
Analysts appear bullish on Phoenix Group’s outlook. Towards the end of May, Royal Bank of Canada reaffirmed its ‘outperform’ rating on the stock, along with a 770p price target. In April, Morgan Stanley reiterated its ‘equal weight’ rating, which Deutsche Bank trimmed its price target to 795p to 750p and put a ‘hold’ rating on the stock. Despite the cut, Deutsche Bank’s target still represents a decent upside on Wednesday’s close.
According to 17 analysts offering 12-month price targets for the stock, Phoenix Group has an average price target of 785p, representing a 23.9% upside on the 1 June closing price. The stock has a consensus ‘outperform’ rating, with 10 analysts rating it as such — up from six a year earlier.
Disclaimer Past performance is not a reliable indicator of future results.
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