1.4 million private shareholders will welcome this higher payout from Standard Life.
For more than 180 years after it was founded in 1825, Standard Life (LSE: SL) was a mutual insurer, owned by its members and managed for their benefit.
In July 2006, the Edinburgh-based insurer went public, floating at 230p per share on the London Stock Exchange. At the same time, 2.4 million with-profits policyholders received windfalls in the form of free shares worth an average of £1,600.
Also, these policyholders (including my family) were given the option of buying extra shares at a 5% discount to the share price, with another 5% bonus for holding onto these shares for a year. In effect, these shareholders bought discounted shares at either 218.5p or 208.1p a share.
By May 2007, Standard Life shares had risen to a record high of 349.5p, up 60% in 10 months. Then along came the credit crunch and economic downturn, which caused Standard Life's share price to slump. At the market low in March 2009, Standard Life shares traded below 132p.
Of course, both Standard Life's business and its share price have bounced back during the recovery from the global financial crash of 2007-09. Today, the insurer unveiled its preliminary results for 2011, which showed that its balance sheet is continuing to strengthen as financial markets improve.
Despite 'challenging market conditions', Standard Life's assets under administration rose by nearly 3% to exceed £198 billion. This was helped by a 7% rise in sales of long-term savings plans to nearly £20 billion.
As a result, operating profit before tax leapt 28% to £544 million, versus £425 million in 2010. However, this was flattered by a £64 million gain for Standard Life's final-salary pension scheme. In fact, IFRS profit after tax dived 31%, to £298 million from £432 million, largely due to falling stock-markets in 2011.
In terms of capital and cash generation, Standard Life had a strong year. Operating cash generation soared by 53%, from £287 million to £438 million. Even so, the FTSE 100 firm's IGD surplus capital fell from £3.8 billion to £3.1 billion, after it bought back €687 million of its own bonds.
Despite earnings per share falling from 18.3p to 12.9p, Standard Life increased its full-year dividend to 13.8p, up 6.2%. This means that last year's dividend was not fully covered by earnings, which is somewhat unusual for a FTSE 100 firm.
Since its flotation in mid-2006, Standard Life has raised its dividend every year, which is great news for its large base of private shareholders. Here is its (relatively short) dividend history:
|Year||Dividend (p)||Increase (%)|
As you can see, Standard Life has lifted its dividend every year since the maiden payout in 2007 and, overall, its dividend has risen faster than inflation. This is exactly what shareholders want from a 'boring' high-yielding share.
Would I buy Standard Life today?
As I write, Standard Life shares trade unchanged at 237.6p, which values the group at £5.6 billion. At this price, they trade on a forward price-to-earnings ratio of 14.3 and offer a prospective dividend yield of 6.1%, covered just 1.2 times.
Having owned Standard Life shares from the float until late 2008, would I buy them today?
Thanks to its relatively high rating against earnings, and its barely covered dividend, I would give Standard Life a thumbs-down. Although it offers a bumper dividend yield, Standard Life simply doesn't cut it as a value share. For me, rival Aviva (LSE: AV) looks much better value.
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