The Motley Fool

This dividend stock has soared 567% over the past 5 years — and still looks good!

Financial technology concept. Stock market crash.
Image source: Getty Images

Shares of Liontrust Asset Management (LSE: LIO) are up almost 10% this week. This is an impressive little run no doubt. But for investors in the stock, it’s just another week in what has been a very lucrative half-decade. The stock is up 65% in the past year and an incredible 567% over the past five years. Assuming dividends had been reinvested, the total shareholder return would have been closer to 787% for the five-year period. So how has this little known dividend stock achieved this on a stock exchange that has consistently underperformed and should I be buying it?

Beating its peers

As Liontrust is an asset management firm, I can compare it to other brokerage service companies. Intermediate Capital Group and 3i Group returned 218% and 105%, respectively, over the same five-year period. Liontrust has far outstripped its peers in this regard. But for the sake of certainty, say I wanted exposure to the financial services sector generally back in 2017 and chose banking stocks. Lloyds, Barclays and HSBC would have lost me 18%, 14% and 31% of my investment, respectively. I think there’s simply no comparison in the sector to what Liontrust has achieved and it seems like the market is starting to realise the underlying value of this stock.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

The business

Liontrust is structured very similarly to a hedge fund. It employs several different strategies to make a profit for its investors. In 2021 it almost doubled its assets under management (AUM) from £16bn to £30.9bn. This huge influx of extra cash meant that net income also doubled. Free cash flows, which represent the actual cash flowing through the business after deducting operational costs, have almost tripled in the past two years. They went from £15.6m in 2019 to £43.4m in 2021. Positive trending free cash flows are always a plus, as they indicate a growing ability for the company to generate money that can then be returned to me as an investor.

Among the positives is the lack of long-term debt on the balance sheet. Interest payments on long-term debt cripple the ability of a business to reinvest revenues and grow the business. Therefore, Liontrust carrying almost none is very encouraging to see. Also worth noting is the recent move into the ESG area with its Sustainable Future fund managing £13.2bn in assets, making it by far the largest in the UK.

So back to the question of whether I’d buy. From a growth perspective, I think there’s still a lot of upside to this stock, but from a value perspective, it’s not something I’d look to hold for life based on what I’m currently seeing. Liontrust doesn’t sell a unique product or unique service and with a market cap of just £1.46bn, it doesn’t benefit from from competitors facing a high cost of entry. Warren Buffett might say it has no durable competitive advantage or moat.

That being said, even though I’m a value investor at heart, I would buy this stock today as part of the smaller growth part of my portfolio. The potential upside in the short term is simply too tempting to pass up, I feel.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Stephen Bhasera has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.