I’ve just been handed a list of the top 10 popular shares among AJ Bell investors in 2024 and was pleased to see UK income stocks feature heavily.
I wasn’t surprised to see US chipmaker Nvidia at number one. Or that corporate Bitcoin holder MicroStrategy, Warren Buffett’s vehicle Berkshire Hathaway and Microsoft all made the top 10.
But I was surprised to see FTSE 100-listed insurer Legal & General Group (LSE: LGEN) in third place. I was even more surprised to see Phoenix Group Holdings in fifth and wealth manager M&G (LSE: MNG) in sixth. Yet I shouldn’t have been. I hold all three myself.
I should mention that FTSE 100 oil giant BP is in second place, which gratifies me because I bought its shares twice recently. But that’s for another article.
UK investors can’t resist M&G’s juicy dividend
Despite the allure of the US tech giants, investors continue to appreciate the value of a top UK dividend stock. The fabulous three FTSE 100 high-yielders are outselling US tech mega-caps Amazon, Meta Platforms and Apple, none of which make the top 10.
Most popular shares with AJ Bell’s DIY investors in 2024
Nvidia
BP
Legal & General
MicroStrategy
Phoenix
M&G
Berkshire Hathaway
Applied Nutrition
Microsoft
CleanSpark
Based on £ net flows on AJ Bell’s DIY investor platform from 1 Jan 2024 to 6 December 2024
It’s not hard to see the appeal. Today, M&G has a trailing yield of a blistering 9.93%. That’s almost triple the FTSE 100 average of 3.5%. Legal & General isn’t far behind yielding 8.85%. Incredibly, Phoenix trumps them both, yielding 10.22%.
While this is a stunning rate of passive income, share price performance has been poor. Over the last 12 months, the M&G share price has fallen 7.78%. Worryingly, it’s also down 18.14% over five years.
Similarly, Legal & General shares have fallen 4.01% over one year and 23.94% over five. Phoenix shares may be up 4.39% over 12 months, but over five years they’re down 28.96%. ISA investors may be wondering if they made a mistake.
These FTSE 100 dividend stocks will rally one day
It’s no fun earning a heap of income if your capital keeps shrinking. Especially if the boards decide those sky-high dividends are unsustainable, and cut shareholder payouts.
So why are they struggling? Let’s take M&G as an example. It’s had a tough year, as today’s higher interest rates make servicing its £8bn net debt pricier.
CEO Andrea Rossi recently complained of a “challenging market environment”, which led to £1.5bn in net first-half outflows. Pre-tax operating profits fell 3.8% to £375m.
The good news is that the dividend looks secure, with M&G lifting its capital generation forecast to £2.7bn. When interest rates finally slide, M&G’s supersized yield will look even more attractive as yields on low-risk cash and bonds decline. Its shares may rise as investors dive in. No guarantees though.
I think that moment is worth waiting for. While I wait, I’ll get that whopping income. Holding these three high income stocks is a risk, but I don’t think it’s a mistake.
The post ISA investors love these 3 FTSE ultra-high income stocks. Frankly, so do I appeared first on The Motley Fool UK.
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More reading
What might waiting a decade to start a Lifetime ISA cost?
Some passive income ideas really are simple. Here’s one!
2,475 shares in this overlooked FTSE 100 dividend gem could make me £9,532 a year in passive income over time!
Investing a £20k Stocks and Shares ISA in this high-yielder might give me a £2,000 annual income
The M&G dividend yield’s almost 10% — and the share’s looking cheap!
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Harvey Jones has positions in Bp P.l.c., Legal & General Group Plc, M&g Plc, and Phoenix Group Plc. The Motley Fool UK has recommended Aj Bell Plc, Apple, M&g Plc, Meta Platforms, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
