I’m always on the hunt for a cut-price stock offering a juicy dividend yield, and one just caught my eye.
Online trading platform IG Group Holdings (LSE: IGG) is easily the worst FTSE 100 performer over the past three months, plunging 43.5%. That’s twice as bad as the next worse (Rentokil Initial, down 21%).
The IG share price was flying at the start of the year as markets became more volatile and trading picked up. So is this quickfire dip a buying opportunity, or a warning to stay away?
Here’s why the stock plunged
IG has been hit by a double dip. First, after the board announced its $1.3bn acquisition of US prediction-markets business Underdog on 30 July. IG is keen to expand beyond its traditional trading operations, but the deal brings bags of execution and regulatory uncertainty.
IG’s trading update (2 October) dealt the next blow as management warned that Q3 revenue would fall around 14% year on year to £240m.
The board also cut its 2026 revenue growth forecast from between 10% and 15% to mid-single-digits, blaming less supportive market conditions and a fall in the proportion of trading income it retained.
IG Group earns more when markets are volatile and client trading soars. But it revamped its strategy in 2025, keeping more trading income from clients in-house by cutting hedging costs. Unfortunately, this left it more exposed in calmer market conditions, when clients trade less aggressively.
The recovery case
In the past, I’ve been too quick to buy stocks after a sharp dip like this, so I’m approaching with caution. Yet there are positives. New customer activity remains strong, with organic first trades up 25% in Q3. First-half results (30 July) showed revenue rising 18% to £642.8m.
Broker forecasts suggest the shares could recover sharply. One-year forecasts from nine brokers produce a consensus target of 1,448p. That would represent a stunning 50% gain from today’s 968p. However, I’m concerned that several of these will have been published before the October slump, and may not reflect all the bad news.
That said, broker Jefferies reiterated its Buy rating and 1,200p target on 19 October. It was upbeat about the Underdog purchase, and also highlighted the core operational and margin advantages of IG Group owning its own broker, exchange, and clearing infrastructure.
IG’s Capital Markets Day on 22 October was broadly well received, with broker UBS backing the group’s efficiency drive and maintaining its Buy rating with a reiterated 1,425p target.
Income at a bargain price?
The forecast dividend yield for 2026 is around 5%, which is pretty decent. The price-to-earnings ratio has fallen to just 4.6, well below the FTSE 100 average P/E of around 15. That represents deep bargain territory.
IG Group is a hugely tempting recovery stock, but it’s also risky. While I’m tempted, I’m waiting to see whether Underdog purchase really comes off before I’ll consider buying it.
For investors seeking an even higher dividend income, this FTSE 100 dividend stock yields almost 7%…
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
