Up 50%, this FTSE 100 stock still has a 6.4% dividend yield! Time to buy?

The FTSE 100’s on a hot streak, already delivering a 7% return since 2026 kicked off, even after rising by over 25% last year. And near the front of this upward rally stands M&G (LSE:MNG).

The UK savings and investment company has seen its share price surge by over 50% in the last 12 months, and is continuing to outpace its parent index in 2026. Yet with dividends also enjoying a boost, the shares still offer an impressive 6.4% yield.

So is this a no-brainer for investors seeking both growth and income?

The bull case

After years of client capital outflows, 2025’s proven to be a critical inflexion point for M&G’s asset management and life insurance businesses. Through a combination of interest rate cuts and international expansion, the firm’s delivered stronger investment returns for clients while simultaneously attracting new customers.

Subsequently, across the first three quarters of 2025, net client inflows reached £3.9bn, reversing the previous downward trend, boosting its total assets under management to £365bn, and paving the way for more fee-earnings opportunities.

This momentum’s only expected to accelerate with new annuity and bond product launches in the first quarter of 2026. And when combined with ongoing operational simplification and other self-help initiatives, profit and cash generation efficiency appear to be on a firm upward trajectory.

Topping all this off with a 230% solvency ratio (more than twice the regulatory requirement), this FTSE 100 stock seems to be in a strong position to reward shareholders.

The bear case

Even with strong fundamentals, there remain some crucial risks for investors to consider. The balance sheet, while cash-rich, remains fairly leveraged and exposed to fluctuations in the stock and bond markets.

Why? Because inside a large number of its financial products and funds, the firm has invested in various shares and bonds. More recently, these assets have proven to be quite lucrative with their asset managers delivering strong returns for clients and, in turn, higher fees for M&G.

But if a recession comes knocking, both stocks and bonds could end up seeing their valuations drop sharply. If clients get spooked and withdraw their capital, M&G could find itself forced to sell at terrible prices, potentially incurring substantial losses in the process.

Put simply, M&G’s performance is highly dependent on that of the economy. And since both the UK and US markets aren’t in terrific shape, the firm’s recent upward trajectory and dividend coverage could reverse and come under rapid new pressure.

What’s the verdict?

It’s encouraging to see management’s strategy deliver positive results for the business. And with new product launches right around the corner, this positive momentum could be set to continue.

Having said that, when looking at the latest expert forecasts, it seems a lot of this growth could already be baked into the share price. As such, buying shares today could translate to taking on a lot of risk for not much reward.

With that in mind, as tempting as a 6.4% dividend yield is, I think there are potentially better buying opportunities for investors to explore right now. Luckily, they’re spoiled for choice.

The post Up 50%, this FTSE 100 stock still has a 6.4% dividend yield! Time to buy? appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended M&g Plc. 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.

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