Shares in Aberdeen Asset Management (LSE: ADN) are up by an impressive 43% from their February low of 209p. But what’s the outlook for this firm? Customers have been withdrawing cash steadily from Aberdeen’s funds over the last year, raising concerns about the safety of the firm’s dividend.
We already know that Aberdeen experienced a net outflow of £9.1bn during the first quarter of the current financial year. That’s equivalent to around 3% of assets under management — quite a lot for a single quarter.
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If Aberdeen’s interim results show that outflows are slowing or have reversed, I’d expect a positive reaction from the market.
I’d also expect the shares to get a boost if Aberdeen confirms that it has no plans to cut the dividend this year. Although Aberdeen has the cash to pay the dividend regardless of profits, this year’s earnings are barely expected to cover the dividend payout. A cut is possible.
I suspect that Aberdeen shares offer long-term value at current prices. Despite this, you may want to wait until its interim results on 3 May before making a trading decision.
Is today’s fall a buying opportunity?
Shares in specialist plastics firm Victrex (LSE: VCT) fell by 8% on Thursday morning. The fall was triggered by news that the firm had reached an agreement with the US Federal Trade Commission to settle allegations that its Invibio subsidiary demanded exclusive contracts to protect its market share.
The FTC statement was released after UK markets had closed on Wednesday and appears to have surprised investors. Invibio makes a polymer used in medical implants and accounted for 19% of Victrex sales last year.
Investors are likely to be concerned that Invibio sales may fall as a result of the decision, although Victrex said this morning that it doesn’t expect the settlement to have “a material impact”. I suspect any impact will be short-lived.
Victrex shares now trade on 14.9 times 2016 forecast earnings and have a prospective yield of 3.7%. The group has net cash and is expected to report further growth in 2016/17. Today’s fall could be a buying opportunity.
Is this cash machine getting expensive?
AIM-listed claims management and legal services company Redde (LSE: REDD) bounced nearly 5% higher this morning, after the firm said that operating profits were ahead of expectations so far this year.
Redde’s board stopped short of upgrading its guidance for the year. What they did say was that “the Board remains confident” about prospects for the full year, which ends in June.
At today’s price, Redde shares offer a forecast yield of 5.9% and trade on a forecast P/E of 18. It’s unusual for a company to have a high P/E and a high yield, because it implies that the firm is paying out almost all of its earnings as dividends.
In Redde’s case this is exactly what’s happening. Last year’s ordinary dividend of 8.25p was almost the same as the firm’s adjusted earnings of 8.4p per share. This year the equivalent figures are expected to be 9.5p and 9.0p.
Redde can afford to be this generous because the group’s business appears to generate surplus cash in excess of its reported profits. This situation may not last forever, but the shares do seem attractive.