Hargreaves Lansdown (LSE: HL) shares have has had a nightmarish five years, falling 64.83% in that time. Only British Airways-owner IAG has fared worse, falling 66.79%.
Hargreaves only escaped wooden spoon status because its stock has jumped 4.59% in the last week, boosted by a positive set of full-year results. Its recent performance is far worse than I imagined. This makes me want to buy it.
Flying then falling
The pandemic and subsequent stock market, economic and political volatility have taken their toll on Hargreaves Lansdown. Measured over one year, its shares are down 7.69%. Today, I can buy them for less than 815p, and I’m sorely tempted.
The two things that have stopped me from purchasing it in the past are no longer an issue. Now I’m wondering whether it’s ripe for take-off as market sentiment and the FTSE 100 recover.
The first thing that put me off was that the shares looked expensive. I remember them trading at 28 times earnings. Today, they’re down to just 11.8 times. That’s cheap by its heady standards.
The second reason I held back was that the stock only yielded income of around 2% a year, and I do like a nice dividend. That’s not an issue today, with today’s 5.1% yield forecast to hit 6.01% in 2024.
Obviously, that’s a consequence of the falling share price. Yet I’m pleased to see the board has steadily hiked the dividend throughout its recent slide, including during the pandemic (see box). On Tuesday (19 September), the board announced that it had increased its ordinary dividend by 4.5% to 41.5p per share.
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Dividend per share | 33.70p | 37.50p | 38.50p | 39.70p | 41.50p |
| Yield | 1.8% | 2.3% | 2.4% | 5.0% | 5.1% |
Tuesday’s results show that Hargreaves Lansdown took on net new business worth £4.8bn in full-year 2023. That was a drop of 13% on 2022, but still healthy. It won 67,000 new clients, lifting the total beyond 1.8m.
Client retention is pretty good at 92%, despite intense competition from rival platforms such as AJ Bell, Bestinvest, Interactive Investor and many more. Hargreaves is often seen as relatively expensive, but a winner for customer service.
Last year’s crash was punishing for almost every fund manager and wealth platform, but 2023’s recovery helped lift Hargreaves Lansdown’s assets under management by 8% to £134bn in the year to 30 June. Underlying profit before tax jumped 47% to £438.8m.
Soon time to act
What happens next depends on the wider stock market. If interest rates peak and investor sentiment recovers, client numbers and assets under management should continue to rise. Hargreaves is still the sector leader, even though its ‘moat’ against competitors is not particularly high. As always, market movements are unpredictable. Equities could fall instead.
I’ve already got exposure to the stock market recovery through asset manager Legal & General Group and wealth manager M&G. Both are cheaper and yield more. That’s the only thing stopping me from buying Hargreaves Lansdown today.
I’ll probably buy it anyway. This could be my last chance for some years to pick up its shares on the cheap.
