Big yielding Phoenix sees cash roll in for dividends and pledges climate change targets for £300bn pension portfolio

Jim Armitage
·2 min read
Climate change activists chain themselves together outside the BBC Bristol building (PA)
Climate change activists chain themselves together outside the BBC Bristol building (PA)

The head of Britain’s biggest pensions operator, Phoenix, today said he saw plenty of scope for new acquisitions even as the company digests its recent takeover Swiss Re UK operations.

Phoenix has grown rapidly by taking on financially stretched companies’ pension obligations in so-called bulk annuity deals.

“We would certainly be opportunistic if deals came up,” said chief executive Andy Briggs. “Covid has meant lots of businesses are struggling, finding it hard to pay their dividends and invest in their legacy systems.”

Phoenix kicked off a capital markets day with news of a hefty beat on its already increased targets for cash generation.

Cash generation came in at £1.7 billion this year, more than double last year and exceeding its new target of £1.6 billion.

Briggs also pledged to make a series of moves to pressurise the companies its pensions invest in to cut their carbon footprints.

He said Phoenix’s portfolio would be carbon neutral by 2050.

Growth in new business in the first nine months of the year came in at £472 million, already beating the whole of last year’s £483 million.

Despite having seen its share price rise in recent weeks, Phoenix’s dividend yield is still running at around 6%.

Its £480 million dividend payment is made from £1.7 billion of cash, meaning it is covered 3.5 times.

However, Briggs has pledged not to increase dividends beyond the established 4%.

He is not expected to pay more back to shareholders until growth in new business is enough to outstrip the loss of its heritage business..

“What is most important is that the dividend is stable and sustainable in the long term," he said.

Briggs was formerly head of Aviva’s UK operations and joined Phoenix as CEO earlier this year.

He said he was keen to drive its “purpose” - corporate speak for doing good in society.

A key part of that will be its new climate change promises, including making its £300 billion of customers’ investments carbon neutral by 2050, in accordance with Paris Agreement pledges.

Challenged on the extremely long term target, he said: “It’s true, these are a long way out, and it’s completely right to be challenged on that issue.”

He said the company was in the process of setting more short term targets which would be “science based”, and was engaging with its investee companies.

He said the group’s equity and fixed income investments would be the immediate focus. “We will have a process of active realignment and engagement to change behaviours within our portfolio.”

Meanwhile, Phoenix itself was committing to being carbon neutral by 2025.

Read More

Revealed: The FTSE stocks most likely to pay dividends in 2021

The 25 best shares and funds to invest in the new Covid-19 lockdown