RBC Capital Markets has kept a cautious stance on M&G, warning that the savings and investment group's dividend growth looks pedestrian and its shares screen expensive against rivals.
The broker reiterated a "sector perform" rating and a 335p price target on the FTSE 100 company, implying little upside from current levels.
RBC left its operating profit forecasts unchanged following M&G's first-half results, which it said were broadly in line with expectations.
Profits and capital generation met forecasts, helped by higher assets under management and reserves, though the bottom line missed on higher hedging and restructuring costs.
The group's solvency ratio came in well ahead of expectations at 247%, boosted by higher interest rates and equity markets.
Despite that strength, and guidance for full-year profit growth in the low double digits, management stuck firmly to its target of just 2% annual dividend growth.
RBC noted that M&G argued its surplus capital was not readily distributable, reflecting the structure of its with-profits fund, where the cash flows boosting solvency lie far in the future.
Analyst Ben Cohen expects pressure to lift the dividend closer to profit growth to build over time, but left his 2% assumption in place for now.
The bank flagged that M&G offers the second-lowest dividend yield among UK life peers and the lowest free cash flow yield.
Adjusting for growth, it also screens expensive on earnings.
RBC said the cash generation profile should improve as M&G shifts towards quicker-payback products, but cautioned that further investment would be needed to sustain growth in competitive markets.
