Can Aberdeen Asset Management's dividend continue to beat the wider market?
In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF (LSE: ISF), for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:
|Dividend per share||19.1p||20.2p||17.1p||16.2p||18.1p|
But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is Aberdeen Asset Management Group (LSE: ADN).
The big question is can the company's dividend continue to out-perform its index. Let's take a closer look.
Aberdeen Asset Management is an international investment management group, managing assets for both institutions and private individuals. With the shares at 328p, the market cap is around £3,382 million. This table summarises the firm's recent financial record:
|Net cash from operations (£m)||(29.93)||64.5||17.1||212.6||366.4|
|Adjusted earnings per share||12.29p||9.45p||6.52p||14.09p||20.13p|
|Dividend per share||5.5p||5.8p||6p||7p||9p|
So, the dividend has increased by 64% during the last five years -- equivalent to a 13.1% compound annual growth rate.
Describing itself as a pure asset management company, Aberdeen employs around 1900 people in 23 countries to manage other people's money.
Last year, the company earned about 94% of its revenues from management fees, 5% from performance fees and 1% from transaction fees. Those cash-generating incomes were derived from some £184 billion of assets under management. Of that figure, roughly 44% was in equities, 24% in fixed income, 15% in alternative investment strategies, 12% in property and 5% in the money markets.
Although the directors expect slow global growth for years ahead, they seem confident that opportunities to work assets hard for their owners will continue to exist. If that's true, it can only be good news for the dividend, judging by past performance.
Aberdeen's dividend growth score
I analyse four different features of a company to judge whether its dividend can continue to rise:
1. Dividend cover: adjusted earnings covered the recent dividend more than twice. 4/5
2. Net cash or debt: at the last count, there was net cash on the balance sheet. 5/5
3. Cash flow: good support for profits from cash flow with both trending up. 5/5
4. Outlook and recent trading: healthy recent trading and a cautiously positive outlook. 4/5
Overall, I score Aberdeen Asset Management 18 out of 20, which encourages me to believe the firm's dividend can continue to out-pace dividends from the FTSE 100.
Aberdeen is looking good from all four sides, which makes the prospects for the dividend look promising.
Right now, the forecast full-year dividend for 2013 is 12.4p per share, which supports a possible income of 3.8%. That looks quite attractive given the strength of recent trading.
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> Kevin does not own any shares mentioned in this article.