Down 15%, is it time to buy this LSE stock for high passive income?

Down 15%, time to buy this LSE stock for high passive income?

Making money while we sleep - the most extreme example of passive income - has always appealed to me. And the most direct way to do this is to buy high-quality, high-yielding stocksInvestment company M&G (LSE: MNG) is listed on the London Stock Exchange's (LSE) leading index - the FTSE 100. It is therefore a high-quality stock that adheres to the benchmark's strict rules and regulations. just above 10%, which puts it at the top of the index payout list.

Of course, there are risks associated with the company. The ongoing cost of living crisis may affect the flow of clients. At some point, there could be another financial crisis that could make it harder to generate trading profits. However, its core business makes the high returns seem sustainable to me. And even better, the stock is trading at a 15% discount to its high on March 2 of this year.

Why is it at a bargain level?

In my opinion, the key reason it lost 15% of its value had nothing to do with the company. It arose out of general fears of a new financial crisis that began on rumors of trouble at Silicon Valley Bank.However, after the Great Financial Crisis, new rules came in to strengthen the balance sheets of British financial firms. As a result, I believe that no permanent discount to M&G's share price is warranted based on this factor.

New accounting standards are feared

Another reason for the drop in the share price was the potential impact of the new accounting rules on its numbers. However, on 20 July M&G said the new rules would not change its strategy, solvency, capital management framework or dividend policy.It added that it remains committed to its financial target of generating £2.5bn of working capital in 2022-2024. So again, I see no reason why the share price should continue to reflect this fear.

The core business remains solid

Its 2022 results showed working capital of £821m, with improved capital formation of £628m.It also maintained a Solvency II shareholder coverage ratio of 199%. This level of coverage is considered very strong protection against insolvency. Another positive in the Q1 update was a net inflow of £1bn into wholesale asset management. This was £0.3bn more than Q1 2022.

Big passive income payouts

In the results for 2022, it announced a second interim dividend of 13.4 pb per share. Added to the first payment of 6.2p, this gave a total payout of 19.6p. Based on the current share price of £1.95, this gives an annual yield of 10.05%.Even at a 10% average over 10 years, an investment of £10,000 would now earn me £1,000 a year in passive income. At the end of the 10 years I would have made an extra £10,000 – doubling my money over that time frame.

This return would not include additional gains from any dividend reinvestment or share price appreciation. On the other hand, of course, there would also be tax liabilities or share price declines. I already have holdings in this sector. But even with those, I'm seriously considering buying M&G shares. I believe the share price losses are unwarranted and will correct over time. I also expect it to stick to its history of paying healthy returns.

While the media raves about Google and Amazon, this lesser-known stock has quietly risen 880% - with:More than 20x increase in margins Almost 60% increase in sales in 5 years - more than Apple, Amazon and Google!3000% Profit Explosion Of course, past performance is no guarantee of future results. However, we think it is now stronger than ever. Surprisingly, you may never have heard of this company.

Still, there's a 1 in 3 chance you've used one of her 250 brands. Many of these are well-known with millions of monthly website visitors, often helping consumers compare items, shop and save. Now that the "cost of living crisis" is upon us, we believe its influence could be on the rise. And that could bring immediate new profits to investors who are in position today. So please don't leave without reporting FREE,

Simon Watkins has no position in any of the stocks mentioned. Motley Fool UK recommended M&g Plc. The opinions expressed about the companies mentioned in this article are the opinions of the author 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 does

In the dynamic world of stock market investing, timing is of the essence. When a well-performing stock experiences a significant drop in value, it's natural to wonder if it's the right time to take advantage of the opportunity and potentially generate a steady stream of passive income. If you're looking at LSE shares, which have recently fallen 15%, you might be in for something lucrative.

LSE Stock Overview

Before we jump into the buying decision, let's take a quick look at what LSE (London Stock Exchange) shares are all about. As one of the world's best-known financial markets, the LSE has a reputation for stability and growth. It plays a key role in the global financial ecosystem, making it an attractive option for investors seeking both capital appreciation and passive income.

Understanding the 15% decline

Understanding the reason for the recent 15% decline is vital. Market movements can be triggered by various factors such as macroeconomic trends, company-specific news, industry developments or even short-term changes in sentiment. Do thorough research to identify the specific catalyst responsible for the decline, as this will influence your purchasing decision.

Dividend yield: One of the most attractive aspects of investing in shares such as the LSE is the potential for high dividend yields. A lower share price means a higher dividend yield, which can translate into significant passive income. Analyze the historical dividend payouts of LSE shares and assess whether the current yield is attractive.

Long-term growth: While immediate passive income is a great incentive, don't overlook the long-term growth potential of stocks. Take a look at the company's fundamentals, market position, competitive advantages and growth prospects. A well-positioned company is more likely to recover from a temporary setback and continue to provide significant returns.

Risk assessment: As with any investment, it is essential to evaluate the risks involved. Consider not only the reasons for the recent decline, but also the potential future challenges the company may face. Diversify your portfolio to reduce risk and protect your investment.

The recent 15% drop in LSE shares has undoubtedly caught the attention of investors looking for high passive income. However, prudent decision-making is necessary in the stock market. Thoroughly evaluate the reasons for the decline, the long-term potential of the company and the associated risks. If the analysis aligns with your investment objectives and risk tolerance, this could be an ideal time to buy LSE shares and gain lucrative passive income opportunities while enjoying the potential for long-term growth. Remember to stay informed, diversify and consult with financial professionals before making any investment decisions.