The Stocks and Shares ISA is a brilliant home for long-term dividend paying stocks. And after recent stock market volatility, there are some incredible-looking yields to be had.
One of the most striking comes fro FTSE 250 financial stock aberdeen (LSE: ABDN), which now offers a whopping 10.1% yield.
The company has had a rough ride ever since the troubled merger between Standard Life and Aberdeen Asset Management in 2017. That £11bn deal ended up doing more harm than good. Too many funds were left overlapping and indistinct, leading to closures and redemptions.
Nightmare merger
Lloyds then pulled a massive £25bn mandate, and the ill-fated 2021 rebrand to abrdn invited mockery, which duly came.
The aberdeen share price collapse wasn’t funny though. Today, the market cap is a meagre £2.65bn. It’s broadly flat over the last 12 months and things might finally be turning around.
Financials across the FTSE 100 have struggled. Aviva, Legal & General Group, M&G and Phoenix Group Holdings have all traded on low multiples and high yields at times. But none have suffered the same kind of meltdown.
The overdue rebrand to aberdeen is just one sign that management is trying to reset the narrative. I just wish the leadership team gone all the way, and reinstated the capital A.
Under CEO Jason Windsor, the business has sharpened its focus and finally returned to profit growth in 2024, the first time that’s happened in three years.
The acquisition of interactive investor has at least paid off as the investment platform posted adjusted operating profit of £116m in 2024.
Ultra-high income
aberdeen’s advisory business also improved, with earnings up 7% to £126m despite continued outflows. And its Institutional & Retail Wealth division saw net inflows after years of decline.
There’s still work to do. The yield is sky high but that’s purely down to the plunging share price. In practice, shareholder payouts have stayed flat for five years. The board has paid out 7.3p a year every May and every September since 2020 with metronomic efficiency. Unfortunately, that means the real value is being eroded by inflation.
Still, at least it hasn’t been cut and given the scale of the yield, it’s hard for investors to complain.
Positive forecast
Analysts remain cautious. The consensus one-year share price target stands at 158p. That would mark a modest increase of just under 7% from today’s 147.6p. Combined with the current 10% yield, that would deliver a 17% total return, if correct
Of course, nothing’s guaranteed. Broker forecasts are just educated guesses. The dividend, while regular, isn’t set in stone. Global share prices can fall further from here, hitting inflows and the value of existing assets under management.
But with a price-to-earnings ratio of 10.1 and net capital generation expected to grow 26% by 2026, there’s a case to be made for optimism.
It’s not for those chasing a quick gain. And anyone already holding other high-yielding UK financials may not need more of the same.
But for long-term income-seeking ISA investors without too much overlap, aberdeen finally looks worth considering.
