Today I am looking at why I consider Aberdeen Asset Management (LSE: ADN) to be an all-round stock market star.
Sector-beating dividends on the table
Fund manager Aberdeen Asset Management is a great value pick for those seeking both earnings and income pick, in my opinion. The company has seen revenues surge during the past four years as funds have flowed back into equities following the 2008/2009 b
anking disaster, a situation which has prompted earnings to surge at a mind-boggling compound annual growth rate of 34% since 2010.
Consequently, Aberdeen has raised the dividend at an equally impressive rate, and the company raised the full-year payout almost 40% for the year concluding September 2013 alone, to 16p. The business noted in particular that strong cash flows enabled it to turbocharge the payout, with net cash having leapt by almost two-thirds — to £426.6bn — during the year.
And forecasters expect the business to continue doling out sizeable dividend increases in the coming years — a 10% rise, to 17.5p per share, is expected in 2014, with an additional 14% increase to 20p chalked in for 2015.
These figures create chunky yields of 3.9% and 4.4% for 2014 and 2015 respectively, making mincemeat of the FTSE 100’s forward yield of 3.2% as well as a corresponding readout of 3.3% for the complete financial services sector.
Investment flows poised for resolute rebound
Aberdeen has seen activity slow since the turn of the year, however, with revenues slipping 2% during October-March to £504m and profits falling 3% to £217m. This slippage has been prompted primarily by souring investor appetite towards developing regions and subsequent fund outflows.
However, broker consensus suggests that investor appetite has shifted markedly more recently, a situation which looks likely to boost activity in coming months.
Indeed, analysts at HSBC commented that Aberdeen’s performance has ‘improved significantly‘ in recent months, and that ‘improving sentiment towards emerging markets, improving investment performance and incremental capacity created by outflows in last nine months indicate that flows are likely to bounce back.‘
Against this backdrop I expect Aberdeen’s progressive dividend policy to continue ratcheting through the gears, a scenario underlined by the firm’s decision in May to hike the interim dividend 12.5% to 6.75p per share. I reckon that Aberdeen will remain a lucrative income payout pick well into the future.
