With A 6.6% Yield And 21 Years Of Payout Growth, Is It A No-brainer To Consider Buying This Dividend Stock?

The UK stock market is home to some of the most generous income stocks anywhere in the world, and Chesnara (LSE:CSN) proves just how attractive a genuine dividend yield can get.

The company currently pays a 6.6% yield and sits on a 21-year, dividend-hiking streak, one of the longest unbroken records on the market today. And it’s a key trait that experienced income investors look for.

So does that automatically make Chesnara an obvious quality stock to buy right now? Or is there a hidden catch?

What does it actually do?

Let’s start with a quick introduction. Chesnara is a European life, pensions, and savings consolidator. In simple terms, that means it specialises in buying up closed or non-core insurance books from bigger players and running them efficiently for decades, generating steady cash flow.

Think of it as profiting from the crumbs that larger players don’t want, but smaller players can’t afford.

This business model relies almost entirely on disciplined dealmaking. And 2025 was a genuinely transformational year on that front. The completed acquisition of HSBC Life (UK), rebranded as Chesnara Life, is the largest deal in the company’s history, adding £5bn of assets and an expected £140m of cash generation over the next five years.

Layer on a second deal announced in February, the â¬110m purchase of Scottish Widows Europe, and Chesnara is rapidly scaling into new European territory while its balance sheet stays remarkably well capitalised, with a solvency coverage ratio of 257%, comfortably above its own operating range, and among the highest in the sector.

So how has this all translated in terms of cash flow?

Why the dividend keeps rising

In 2025, operating capital generation, the cash metric that ultimately funds the dividend, climbed 19% to £94m, while adjusted operating profit surged 42% to £56m.

That growth wasn’t accidental. It was driven by strong performance across every business unit alongside capital optimisation actions in the UK. In other words, Chesnara’s simply extracting more value from the policies it already has on its books, while still adding new ones through acquisition.

This exceptional discipline and consistent cash generation is how management has been able to maintain over two decades of continuous dividend hikes. However, like all investments, there are some significant risks.

What could go wrong?

Rapid deal-making always carries integration risk, and Chesnara funded its HSBC Life purchase partly through a £140m rights issue, diluting existing shareholders in the process.

That’s not necessarily a problem if the deal lives up to expectations. But if it or any of its other externally-funded acquisitions fail to deliver solid performance, shareholder value could actually end up getting destroyed, putting pressure on long-term dividend sustainability.

Beyond this execution risk, as an insurance and savings business, Chesnara’s heavily exposed to interest rate movements, currency swings, and lapse rates across three different countries, any of which could dent capital generation if conditions turn unfavourable.

So are these risks worth considering?

The bottom line

A 21-year payout growth streak backed by rising cash generation and a healthy capital buffer is a rare combination at this dividend yield. The macroeconomic uncertainty is holding back investor sentiment, but for those with a higher risk tolerance, I think Chesnara is definitely an income stock worth mulling. And it’s not the only oneâ¦

What income stock do we like better than Chesnara Plc right now?

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Zaven Boyrazian does not hold any positions in the companies mentioned.

The post With a 6.6% yield and 21 years of payout growth, is it a no-brainer to consider buying this dividend stock? appeared first on The Twelfth Magpie.

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