Should you buy St. James’s Place plc & Provident Financial plc on full-year results?

St. James’s Place plc (LON:STJ) and Provident Financial plc (LON:PFG) both announced big dividend increases today.

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St James’s Place (LSE: STJ) has reported a 7% fall in pre-tax profit after the company saw a rise in operating expenses relating to investments to support growth. The wealth management company posted a pre-tax profit of £140.6m, down from £151.3m in 2015.

Despite the dip in profits, St James’s Place benefits from some strong fundamentals. It continues to attract steady inflows — net fund inflows over the past year amounted to £6.8bn — 17% higher than last year’s figure of £5.8bn. This combined with last year’s robust investment gains helped funds under management to grow by 28% last year to £75.3bn.

Additionally, its European embedded value (EEV) new business contribution, which is a measure of the long-term value of new business generated by the company over the past year, increased 18% to £520.2m, while EEV net asset value per share rose 22% to 900.7p. And with shares now trading at less than 1.2x EEV, St James’s Place has rarely been so attractively valued.

CEO steps down

But what seemed more important to investors was the announcement that David Bellamy would be stepping down as chief executive of the company. At one point, the news sent shares down more than 6%, but they have since recovered to 1,068p, just 2% below yesterday’s close.

Bellamy has been chief executive for 11 years, and under his tenure, shares in the company have more than doubled. In his place, chief financial officer Andrew Croft will take over by the end of the year.

Looking ahead, I expect Croft will continue to deliver attractive returns to shareholders. St James’s Place still has strong growth opportunities with its growing distribution network, and the company benefits from very strong customer loyalty — with retention rates of around 95%.

Dividend growth continues to impress, with the company today announcing a 20% increase in its final dividend to 20.67p a share. This brings total dividends to 33p a share, which gives its shares a reasonable 3.1% yield.

Provident Financial

Provident Financial (LSE: PFG) also announced its full year results today. Pre-tax profit for the sub-prime lender soared 25.7% to £343.9m.

Investor response today was muted though, with the shares broadly unchanged at 2,923p by midday, as concerns grow about slowing growth at the company — customer and average receivables growth at Vanquis Bank, its main business, slowed to 8.7% and 13.8% last year, from 9.9% and 19.6%, respectively.

Still, I’m still very excited with the stock as the company continues to deliver double-digit earnings growth and asset quality remains robust, despite macroeconomic headwinds. Today’s trading statement suggests that the group’s underlying fundamentals remain strong and continues to be in line with market expectation.

While I acknowledge that slowing UK growth could lead to rising loan losses, I believe Provident is well cushioned by its robust margins and low operational gearing. Moreover, forward-looking valuations metrics remain attractive, with shares trading at a forward P/E of 15.1, falling to 13.9 next year.

Also, dividend growth continues to benefit from robust growth in capital generation, with Provident Financial declaring a 13.0% increase in its final dividend this year. This brings total dividends this year to 134.6p a share, which gives Provident Financial a tempting yield of 4.6%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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