There are a handful of stocks in the FTSE 100 that look cheap right now. The Standard Life (LSE: SLA) share price is one of these. Shares in the fund manager have fallen by more than a quarter this year as investor sentiment has soured.
However, despite this share price performance, the fundamentals of the investment company have held up relatively well in 2020. As such, the Standard Life share price looks dirt cheap after recent declines.
Standard Life share price offers value
Earlier this year, at the height of the coronavirus pandemic, the Bank of England issued a veiled warning to Standard Life and its peers. The bank wanted these financial services companies to suspend their dividends, to preserve capital in uncertain times.
Standard’s management disagreed, and the group pushed ahead with its payout. This seems to have been the right decision. The crisis does not seem to have impacted the group significantly. In fact, it appears investors have been turning to the fund manager in these times of uncertainty.
Its latest trading update confirmed that the company had seen net inflows of £1bn in the first four months of 2020. These numbers suggest that the virus outbreak may not have a meaningful impact on the group’s bottom line.
That being said, management has warned the crisis will slow down its efforts to cut unnecessary costs across the group. This could have an impact on the Standard Life share price in the short term. But it is unlikely to be a significant long-term drawback.
If there is a second wave of coronavirus, then the company may have to take evasive action. Nevertheless, for the time being, it seems as if Standard Life is coping well in the crisis.
The company has also been selling its stake in Indian business HDFC Life this year. Standard Life holds 10.27% of the Indian firm, worth around £1.1bn, but in recent months the group has been selling down this position and returning the cash to investors with share buybacks.
These repurchases have helped support the share price and provide capital to sustain the company’s dividend yield.
The additional cash provided from the sale of this overseas investment should support investor sentiment towards the Standard Life share price.
Future growth
After recent declines, the Standard Life share price now supports a dividend yield of just over 8%. This is significantly above its historical average of around 5%, suggesting that the stock offers a margin of safety at current levels.
Indeed, when company dividend yields rise significantly above their historical average levels, it may be a sign that the investment is undervalued.
As such, now could be the perfect time to snap upna share of this FTSE 100 dividend champion at a discounted price. The dividend yield of 8% seems safe for the time being, and the stock appears to be undervalued compared to its historical multiples.
