On Friday, RBC Capital Markets adjusted its outlook on Phoenix Group Holdings PLC, a leading UK life insurance company. The firm increased the price target on the company's shares to GBP6.15, up from the previous target of GBP6.00, while reiterating an Outperform rating.
The revision came after Phoenix Group's stock exhibited a notable underperformance compared to its sector and the broader market. Year-to-date, the company's total share returns were down by 7%, while the UK life sector and the FTSE 100 index both saw gains of 11%. Despite this underperformance, RBC Capital noted that Phoenix Group now trades at a fiscal year 2025 dividend yield of 11.6%, which is not only near the lowest it has been in the past five years but also higher than the average yield of its peers, which stands at 9.6%.
The analyst from RBC Capital highlighted that the attractive dividend yield has led some investors to question the company's performance. Addressing these concerns, the analyst underscored Phoenix Group's positive attributes, including its improving cash generation, earnings, and leverage ratio. The firm emphasized that the company's dividend is sustainably covered, a fact that they believe is not currently reflected in the stock's valuation.
Phoenix Group's commitment to maintaining a solid dividend payout appears to be a key factor in RBC Capital's positive stance. The analyst's comments suggest confidence in the company's financial health and its capability to continue rewarding shareholders, despite the recent underperformance in its share price.
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