PHOENIX (PHNX) 781P
Prospective dividend yield: 6.8%
THIS COMPANY SPECIALISES in buying portfolios of life insurance policies which are closed to new business and then managing them efficiently so they deliver plenty of cash flow which can be returned to shareholders.
The company boosted its assets under management through the £935m acquisition of Abbey Life Assurance last September.
It is trying to enhance the quality of its cash stream and its duration by releasing tied up capital or doing deals to add to its book.
This strategy puts the company in a different category to stocks which are on a high yield due to justified scepticism over their ability to maintain the dividend.
Berenberg analyst Trevor Moss argues Phoenix’s is ‘one of the most secure and should be for many years to come’.
The dividend payment looks set to rise as the company does further deals, with management on record as saying it has firepower of £500m for M&A.
There should be plenty of opportunities to put this money to work as Moss explains. ‘The industry dynamics continue to change, with companies looking to become more like asset managers, be more capital light, focus on digital models, release trapped capital or simply focus on what they are best at doing,’ he says. (TS)