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UK investors have been snapping up SpaceX and Rolls-Royce shares over the past month. According to AJ Bell data, these accounted for 1.92% and 2.05% of all purchases, respectively.
However, high-yield dividend stocks Legal & General (5.31% of purchases), Aviva (3.19%) and HSBC (2.17%) led the way. No shocks there.
But with its £7.7bn market cap, M&G (LSE:MNG) is by far the smallest company in the top 10. So what do investors like about this stock?
Buying the dip
It’s worth pointing out that some of this buying activity probably reflects dividend reinvestment plans. That’s customers automatically reinvesting dividends into additional shares. Aviva, M&G and GSK (another stock populating the list) have all paid dividends in October.
Nevertheless, some investors will surely have been tempted by M&G’s pullback. After hitting 367p in August, the stock had dropped to 304p by early October. It’s currently at 323p.
So we have an income stock that has recently paid a dividend and whose share price had dipped. This probably explains a fair bit of the buying.
At 6.4%, M&G’s dividend yield is still one of the highest in the FTSE 100.
What about the actual business?
Looking beyond the dividend, I think there’s a lot to like about the investment, pensions and life insurance company.
In the first half of 2026, operating profit grew 15% to £435m, M&G’s best half-year result since listing in 2019. This was driven by 24% growth in Asset Management and 9% in its Life division (including double-digit profit growth in PruFund). Assets under management and administration reached £387bn.
M&G has made over £250m of savings since 2023, and they’re beginning to pay off. Its Asset Management cost-to-income ratio fell by 2 percentage points to 73%, marking a third consecutive year of improvement, with further progress expected.
In February, the firm introduced BPA+ in an attempt to disrupt the bulk purchase annuity (BPA) market (where pension risk is offloaded to an insurer). BPA+ offers the same guarantees, but also gives pension schemes the potential to benefit from extra cash bonuses if the investments outperform.
Management expects to attract at least £50bn of pension deals by 2030 through this offering.
Our BPA+ has a real edge in the UK BPA market.
CEO Andrea Rossi.
For the full year, M&G expects low double-digit profit growth. Solid stuff.
Modest income growth
A 21.1p dividend is forecast this year, translating into a 6.5% yield. That’s only a modest 2.8% increase on 2025, but if M&G’s “relentless” focus on investing for growth pays off in the form of a higher share price, I’m sure shareholders won’t mind.
That’s not guaranteed, of course. If markets tank, M&G could suffer net client outflows, resulting in less asset management fee income. The firm also faces stiff BPA competition from Legal & General, Aviva and others.
An attractive income stock?
Is the stock worth checking out? Yes, I think so. M&G’s strategic pivot towards capital-light income is bearing fruit, with these now representing 80% of total earnings. This figure is set to grow.
Add a solid balance sheet and an attractive valuation to the mix, and I think there’s plenty to like. Especially the monster dividend yield, surpassed by only a couple of FTSE 100 stocks, including this one…
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Ben McPoland owns shares in Aviva, HSBC, Rolls-Royce and SpaceX.
This story originally appeared on Motley Fool
