Trading at a 10-year low, this FTSE income stock now yields a chunky 6.99%!

Harvey Jones has been watching from the sidelines as shares in this FTSE 100 income stock just fall and fall. Is now a brilliant time to bag its generous yield?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m hungry to add another top FTSE 100 income stock to my portfolio, and Schroders (LSE: SDR) is jumping up and saying ‘Buy Me!’. Should I listen?

The family-controlled fund manager now has a brilliant trailing yield of 6.99%. That’s well above the FTSE 100 average of around 3.5%. At that rate I’d double my money in just over a decade, even if the share price didn’t rise at all. Imagine if it did!

Actually, that’s pretty hard to imagine right now, because the Schroders share price has been tanking for years. 

Should you invest £1,000 in Schroders Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Schroders Plc made the list?

See the 6 stocks

Schroders’ shares should carry a wealth warning

Today, it trades at a 52-week low after dropping 20.05% in the last 12 months. But this is no one-off slump.

Created with Highcharts 11.4.3Schroders Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Ten years ago Schroders’ shares traded at 426p. They’re down almost 28% since at today’s 308.8p. That’s a 10-year low. I’ve been tempted to buy the stock at various points in that time, and I’m glad I resisted. Is this finally my moment?

The latest downward lurch (10% in a month!) followed results published on 5 November, which showed Q3 outflows hitting £2.3bn.

That marked a sharp reversal on the first nine months of the year, when the group enjoyed net flows of £1.6bn. A positive stock market and strong investment performance drove assets under management to a record £777.4bn.

That’s faded now, partly down to market volatility in China. I’m seeing the impact of Beijing’s troubles across my portfolio, with Burberry and Glencore the most glaring examples.

Schroders can’t catch a break. Its asset management operations posted growth in private markets, only to see it wiped out by foreign exchange fluctuations. It faces a further £8bn outflow in Q4, when a legacy Scottish Widows mandate ends, plus another £2bn in notified outflows from other clients.

It still hopes to win between 5% and 7% of net new business growth while chief financial officer Richard Oldfield is looking to “build greater commercial discipline and drive efficiencies through simplification and flawless execution”. Sounds easy enough.

A tough time for FTSE 100 financials

In defence of Schroders, most FTSE 100 financials have had a rough year. I hold Legal & General Group and M&G. Their shares are down 1.71% and 4.27%, although that’s nothing on the scale of Schroders. They yield 9.33% and 10.10% respectively, so the income’s bigger too.

Schroders has a good dividend track record though. It hasn’t cut shareholder payouts for more than 30 years. Since 2004, they’ve risen by an average of 9.8% a year. That continues as this chart shows.


Chart by TradingView

Schroders looks reasonable value, trading at 12.50 times trading earnings. That’s below the FTSE 100 average of 15.4 times. However, the price-to-revenue ratio of 1.7 doesn’t grab me. That suggests I’m paying £1.70 for each £1 of sales.

The 14 analysts offering one-year price forecasts for Schroders have set a median target of 367.4p, some 20.08% higher than today. I suspect those were mostly compiled before the latest dip, when hopes were higher.

Despite its problems, Schroders tempts me. I think stock markets are due a decent run after a bumpy summer, and Schroders could snap back if we get it. I’d buy if I didn’t already hold L&G and M&G.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Harvey Jones has positions in Burberry Group Plc, Glencore Plc, Legal & General Group Plc, and M&g Plc. The Motley Fool UK has recommended Burberry Group Plc, M&g Plc, and Schroders Plc. 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.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »