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2025 was an excellent 12 months for prime earnings dividend shares. I do know as a result of I personal the three greatest yielders on the complete FTSE 100, and so they smashed it! Can they do it once more in 2026?
High FTSE 100 earnings shares
My three massive winners all sit within the monetary sector: insurer and asset supervisor Authorized & Common Group (LSE: LGEN), wealth supervisor M&G (LSE: MNG), and insurer Phoenix Group Holdings (LSE: PHNX). I’ve written about them quite a bit these days, nevertheless it’s onerous to not. Three years in the past, I took an opportunity by pumping a big chunk of my Self-Invested Private Pension (SIPP) into these financials, and it’s paid off past expectations.
On the time, all three appeared unloved, buying and selling on price-to-earnings (P/E) ratios of round six or seven. Their share costs had drifted sideways for years, whereas traders chased US tech mega-caps ever increased.
I nervous they may become worth traps. I additionally had to withstand the pull of their ultra-high dividend yields. At varied factors, all three had been paying greater than 10% a 12 months.
As each investor is aware of, excessive yields generally is a warning signal. Yields rise when share costs fall, which suggests one thing’s going unsuitable. Corporations additionally have to generate baggage of money to fund them. If the dividend’s lower, earnings traders head for the exits and the share value takes a beating.
However I did my homework and concluded the payouts appeared moderately safe. Authorized & Common, M&G and Phoenix all had stable monitor information of sustaining or rising dividends and powerful Solvency II ratios, signalling capital power. So I stuffed my boots.
The dividends have held agency and the shares have soared. M&G’s the standout, with its share value up a shocking 53% over the previous 12 months. Phoenix wasn’t far behind, rising 51%. Add within the earnings and I’m taking a look at a one-year complete return of round 60%.
Extra divisification required
Authorized & Common has lagged, with share value development of 19.4%, however that’s nonetheless fairly respectable, plus I acquired a trailing yield of 8%. Now I’m hoping its shares can play catch-up.
Regardless of its sturdy run, M&G doesn’t look stretched, buying and selling on a P/E of simply 12.2. Authorized & Common’s pricier at 15.6. Phoenix seems a bit costly at this time, its P/E creeping as much as 22.7.
In some unspecified time in the future, I’m anticipating their shares to gradual. These are earnings shares, not development monsters. Nonetheless, all three have benefited from renewed curiosity in UK blue-chips. And if rates of interest proceed to fall, hitting yields on money and bonds, extra traders might swoop.
Their yields aren’t fairly as eye-watering as they had been, because of rising share costs. Even so, M&G’s forecast to yield 7.18% in 2026, Phoenix round 7.7%, and Authorized & Common a powerful 8.33%.
Dividends are by no means assured. All three boards are signalling modest dividend development of two% a 12 months in future. Nevertheless, M&G, Authorized & Common and Phoenix would all undergo in a inventory market crash. Additionally they face fierce competitors for brand new sources of revenues, equivalent to pension threat transfers.
Even so, I nonetheless assume they provide a uncommon likelihood to think about locking in to excessive earnings for the long run. If we do get one other 12 months of regular good points, these once-in-a-decade yields could also be gone for good.
