The highest-yielding dividend share on the FTSE All-Share index is Liontrust Asset Management (LSE:LIO). Based on amounts paid over the past 12 months, the stock’s currently (17 September) yielding an astonishing 24.2%. To put this in context, the average for the 543 companies on the index is 3.35%.
What’s more, the stock has a price-to-earnings (P/E) ratio of 5.2. This compares to 16.4 for the index as a whole, which implies that the share is significantly undervalued and — in theory at least — is likely to deliver some capital growth.
On the face of it, the stock could be in bargain territory.
The devil’s in the detail
However, as a rule of thumb, it’s often said that shares offering a yield over twice that of the 10-year gilt rate — currently 4.64% — should be treated with caution.
And this appears to be good advice when it comes to the specialist asset manager. A look at the five-year share price chart shows that it’s fallen 77%. When combined with a dividend that’s remained unchanged for the past four financial years, the yield has gone through the roof.
| Financial year | Share price (pence) | Dividend (pence) | Yield (%) |
|---|---|---|---|
| 2025 | 371 | 72 | 19.4 |
| 2024 | 672 | 72 | 10.7 |
| 2023 | 1,022 | 72 | 7.1 |
| 2022 | 1,274 | 72 | 5.7 |
| 2021 | 1,420 | 47 | 3.3 |
However, the company’s assets under management (AUM) have fallen in recent years. At 31 March 2021, the figure was £30.9bn. Four years later, £22.6bn. A lower AUM means fewer opportunities to earn management fees and performance bonuses.
During the year ended March 2021 (FY21), it reported revenue of £175.1m, a profit after tax (PAT) of £27.7m and adjusted diluted earnings per share (EPS) of 87.4p. By FY25, revenue had fallen to £169.8m, PAT dropped to £16.7m and EPS was 56.81p.
A new dividend policy
Falling earnings can put a stock’s dividend in jeopardy. And that’s what’s happened with Liontrust. For FY26, the asset manager will pay a dividend of at least 50% of adjusted EPS. Any additional excess capital will be used to buy the company’s own shares.
Had this policy been in place for FY25, the group’s dividend could have been 60.6% lower at 28.4p. Suddenly, the stock’s current enormous yield makes more sense — investors have priced in a cut in its payout.
At 28.4p, the stock would be yielding just under a still generous 10%. This is attractive but no longer the highest on the FTSE All-Share index.
Pros and cons
Encouragingly, the AUM number was unchanged during the first quarter of FY26. And in these uncertain times, the group remains confident that investors will move away from “passive vehicles” and look to fund managers to help grow their portfolios more quickly.
It’s also embarked on a significant cost-cutting exercise to help improve its bottom line.
But the group’s attractive P/E ratio of 5.2 is based on an adjusted EPS figure that adds back the cost of staff redundancies, certain legal expenses and the amortisation (writing-off) of certain intangible assets. Without these changes, EPS would be 26.2p and the group’s P/E ratio would be 11.4.
Don’t get me wrong, a stock offering a yield of 9.5% and a P/E ratio of 11.4 would definitely catch my eye and justify further investigation. However, the decline in its AUM concerns me. That’s why I’ll revisit the investment case when I see this growing again. Until then, taking a position would be too risky for me.
