Image source: Getty Images
I bought two brilliant FTSE 100 dividend stocks three years ago and haven’t regretted it. They’ve behaved like racing demons, taking turns to surge ahead while paying me generous income along the way.
But lately, both have stumbled. M&G (LSE: MNG) has fallen 8.5% over the last month while Standard Life (LSE: SDLF) has dropped 7.5%.
That gives investors the chance to buy them at a lower price and lock-in higher yields. But are these small dips just market nerves, or something more?
M&G yields slightly more
UK government bond yields have surged, with 30-year gilts recently hitting 6%, their highest in 28 years. That makes bonds more competitive with dividend shares, at the same time as inflation, rising interest rates and fears of an AI bubble rattle equity investors.
M&G’s latest half-year results on 3 September showed adjusted operating profit rising 15% to £435m, with assets under management hitting £387bn. But it also reported a £165m IFRS loss after tax, partly due to a £325m pre-tax hit linked to proposed leasehold reforms and ground-rent assets.
The dividend still looks solid, with its shareholder Solvency II coverage ratio hitting 247%, and operating capital generation of £372m.
M&G shares are up 16% over a year. The forward yield is 6.7%. Its trailing price-to-earnings (P/E) ratio is notably higher than before at 24.2, but the forward P/E is below 11.
Challenges include a potential rise in investment outflows if current stock market volatility continues, regulatory changes, and the constant challenges an active fund manager faces when competing with low-cost index trackers.
Standard Life seems cheaper
Despite the recent dip, Standard Life shares are still up around 30% over a year. The forward yield is a handy 6.5%.
Its trailing P/E of 15.4 is lower than M&G’s. That partly reflects different earnings profiles and accounting swings, rather than necessarily proving Standard Life is better value. Its forward P/E of just below 11 is remarkably similar. The market appears to expect stronger earnings from both.
Standard Life’s half-year results on 7 September were encouraging. Adjusted operating profit climbed 25% to £563m, operating cash generation rose 6% to £745m and assets under administration reached £333bn. Its shareholder capital coverage ratio stood at 169%, down from 176% at the end of 2025, but still within its target range.
It’s targeting further growth in retirement savings and income, with its £2bn acquisition of Aegon UK potentially strengthening its position. Risks include Aegon integration problems, volatile markets and stiff competition for pension and annuity business.
Both income stocks have a place
Dividends aren’t guaranteed but both companies have a pretty strong track record. However, dividend growth is expected to slow to just 2% a year in both cases, which is below inflation.
As for valuations, I’m struggling to get a cigarette paper between them. Both look decent on a forward basis, and are likely to respond in a similar way to wider market movements. Both are worth considering for long-term income, although in the short term, their share prices may be a little bumpy. At The Twelfth Magpie we’ve got our eyes on another top UK income stock…
What income stock do we like better than M&g Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at an income share we think is worth your time.
Harvey Jones owns shares in M&G and Standard Life.
This story originally appeared on Motley Fool
