There’s a lot of competition for my choice of favourite blue-chip dividend income stock. Lloyds and wealth manager M&G both grace my Self-Invested Personal Pension (SIPP).
But lately, another holding has been putting on a show. Its name? Savings and retirement specialist Standard Life (LSE: SDLF), until recently known as Phoenix Group.
The last couple of years have been good for financial stocks. The big FTSE 100 banks have flown, as have insurers. Higher interest rates and buoyant stock markets have driven investor demand, as have all those juicy dividends.
So the Standard Life share price is having a moment, climbing 35% over the last year. With a trailing dividend yield of almost 6%, the total return is over 40%.
The way to a super-yield
But let’s not get too carried away. Investing can be cyclical. Before its recent surge, the Standard Life share price went nowhere for a decade.
Cash generation’s strong
Standard Life has a big growth opportunity in the growing retirement savings market as it’s generating plenty of cash and it has £317bn of assets under administration. In 2025, operating cash generation rose 5% to £1.47bn, while adjusted operating profit jumped 15% to £945m.
Like many insurers, it’s also looking to expand in the thriving but competitive pension risk transfer market, with Standard Life teaming up with CVC, Prudential Financial and others, to raise around £2bn to pursue larger defined benefit pension deals.
What are the risks?
After such a strong run, Standard Life isn’t cheap. Its price-to-earnings ratio is now 17.25. The P/E was in single figures when I bought it in 2024. Inevitably, the yield has fallen too. I got in at around 10%.
Standard Life manages £317bn of assets, so a stock market slump would hit fee income. The pension risk transfer expansion brings opportunities but also requires capital and carries execution risks.
So is the dividend secure? Standard Life has a good record, increasing its full-year payout for 10 years in a row, at an average rate of 3.18% a year. However, future incrreases will slow to a more modest 2%. This means that if inflation remains high, the value of those dividends could shrink in real terms.
Also, the company looks financially robust. Its Solvency II shareholder capital coverage ratio was 176% at the end of 2025, comfortably within its 140%-180% operating range.
Other sources of yield
If bond yields continue to rise, income-seeking investors may switch away from dividend-paying equites, as they can grab a decent risk-free yield elsewhere.
I think Standard Life is right up there among the FTSE 100’s very best income stocks. Legal & General offers a higher yield at 7.5%, but its shares have struggled for years.
The shares are worth considering today, but accept that after a strong run, the growth may slow. I’m too exposed to financial stocks to buy more of this one, but I’ve got my eye on equally exciting FTSE income opportunities…
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Harvey Jones owns shares in Legal & General, Lloyds, M&G and Standard Life.
This story originally appeared on Motley Fool
