I am a huge fan of buying stocks for passive income, but with the FTSE 100 near record highs, the number of companies offering high single-digit yields has dwindled. Luckily, there are a whole host of smaller businesses among the FTSE 250 that still offer bumper returns.
One business that I really like the look of is leading asset manager Aberdeen (LSE: ABDN). At today’s share price, an investor who put £1,000 to work would be able to buy 515 shares. With a yield of 7.5%, that unlocks the potential for a yearly passive income of £75. Of course, dividends are never guaranteed.
Stemming outflows
One glance at a long-term share price chart would be enough to put most investors off. Since peaking in 2015 at 600p, the stock has collapsed 68%. But over the past year, I see definite signs of green shoots emerging.
The asset manager is working hard to stem outflows from its Adviser business. In the first half of 2025, outflows totalled £900m. This was an over 50% improvement on the same period last year.
Its strategy is to return Adviser back to inflows through enhancing its value proposition. In order to entice independent financial advisers (IFAs) back to its platform, recently it lowered fees across its numerous funds. This resulted in it taking a short-term hit on revenues.
However, over time, I see this as a smart move in a highly competitive industry. Building personalised relationships with IFAs takes time and they need convincing that Aberdeen has got its house in order before recommending its funds to their clients.
Passive strategies
The root cause of the recent woes for the company has been the mass adoption of passive investing strategies. Compounding this has been the dominance of US stocks, and the Magnificent 7, in particular.
Most of Aberdeen’s funds are actively managed. It also has a very strong affinity with Asian and emerging markets, which have performed poorly over the past few years.
Measured over three years, investment performance against a stated benchmark has improved to 71%, so far this year. This is up from 60% in 2024.
Digging into the details, though, one finds is that its actively managed bond funds have performed exceptionally well. But its equity funds remain sub-optimal, with much work to do.
Bull case
After hitting an all-time low back in April, the stock has bounced back strongly. Despite all its problems, it remains a major player in the industry with assets under management totalling £500bn.
If the business can get its house in order, there is no doubt that the opportunity is enormous. interactive investor (its direct-to-consumer offering) is nearly as recognisable a brand as Hargreaves Lansdown, and is growing at an exponential rate.
I remain of the firm view that active management is likely to make a major comeback in the years ahead. Exceptional market volatility as of late, together with increasing geopolitical risks and the rise of deglobalisation, is likely to result in more investors turning to active managers to manage these risks. And besides, US stocks have hardly shone this year.
I don’t know of many well-known stocks with an established business model paying market-beating dividends today. That is why I have been buying so heavily over the past few months, and think it is one worthy of further research by any investor.
