A rising share price typically means a falling dividend yield, in the absence of dividend growth. FTSE 250 share Aberdeen Group (LSE: ABDN) has not grown its dividend for many years. But, despite its share price rising by 41% in just 12 months, it still yields 7.5%.
Could now be the time for investors to consider this high-yield share?
Strong potential but an uneven performance
I should mention that I have owned the FTSE 250 share before.
Back then, I felt the company had underlying strengths, such as a large customer base and a clear value proposition. Its business model had proven it could do well even if it did not always consistently deliver.
That inconsistency was part of the problem, though. While it seemed to have the makings of a strong business, it did not always seem to capitalise on them effectively.
Have things changed?
Dividend looks attractive
There are some mixed signals about whether the business is on more of an even keel than it once was. Overall, I think things are looking pretty good.
In the first half of this year, the company’s diluted earnings per share grew a very impressive 48% year on year.
However, adjusted net operating revenue slid 6% and net flows were negative, meaning more money left the company’s funds than was put into them.
Seen positively, that could be a sign that the asset manager is taking a more strategic approach, focused on profitable business. Over time, it expects to grow.
The company has said it is committed to supporting the dividend. Whether that happens will depend on financial performance.
But I see management’s commitment as a positive sign that it is focussed on how to maintain the shareholder payout.
In the first half, paying ordinary dividends cost Aberdeen £130m. That was amply covered by net cash flows from operating activities of £241m.
One to consider
There is a lot of work still to be done to unlock the full potential of the FSTE 250 firm, I reckon.
But it has been getting its act together in the past several years and I think that shows through in its first-half profitability.
I also think it is reflected in the strong performance of the share price over the past 12 months.
It is still around two-thirds lower than it was back in 2015. That shows how far the company has fallen in some investors’ favour.
But it has well-known brands, including not only Aberdeen itself but also the investment platform interactive investor. The company has a sizeable customer base and has demonstrated that it can generate sizeable amounts of excess cash over time.
Taken together with its focus on maintaining its dividend at the current level, I see this as an income share for investors to consider.
