I’ve always said it’s better to choose your own shares than put your money under the control of an investment manager, as you stand to do better than most and won’t be paying any fees for the service.
The converse is that buying shares in investment managers can be good for your wealth — instead of paying fees, you’re getting a cut of them for yourself.
Premier Asset Management (LSE: PAM) only floated on AIM in October 2016, yet the share price has already risen by 17.5%, to 156.5p, and I reckon there should be a lot more to come.
At the interim stage, the firm reported £311m in net inflows for the six months, with £667m over a rolling 12-month period. That’s 16 quarters of net inflow in a row now, which is an enviable record to have.
Impressive performance
Assets under management (AUM) are on the up too, growing by 11% to £5.5bn. And over the past five years, 96% of Premier’s AUM were performing above median levels with 80% in the top quartile. That’s the kind of performance that’s likely to keep those inflows going.
Pre-tax profit for the period climbed by 32% to £6.25m, for earnings per share of 3.03p, with analysts forecasting around 11.5p for the full year.
A number of Premier’s funds are targeted at above-average income yields, and the company apparently intends to treat its shareholders similarly. At flotation time, we were told of a dividend policy “that reflected the expectation of future cash flow generation and the long‐term earnings potential of Premier.“
That seems to be coming good, with a 5% dividend yield forecast for this year and a nice boost to 7.3% on the cards for 2018.
Student property
My second high-yield pick today is Empiric Student Property (LSE:ESP), which is in the profitable and cash-rich business of owning and operating UK student accommodation.
Dividend yields are progressive, with yields of 5.4% and 5.5% predicted for this year and next. The firm has already told us it is targeting a payment of 6.1p per share for 2017, so that at least should be safe.
In the past couple of years the dividend has not been covered by earnings, but Empiric is paying out cash as property income distribution under Real Estate Investment Trust rules, and earnings look set to rise above the dividend in the near future. So over the long term, I see this as a potentially very rewarding income investment.
Growth too?
That’s not to say there won’t be any capital growth, because it’s looking like we’ll get that too. A revised investment policy should see the company “able to acquire or develop a more diverse range of student accommodation formats, catering for students from their first year as undergraduates to postgraduates, both UK and international.“
At December 2016, Empiric enjoyed a relatively modest loan-to-value ratio of 31%, and boasted a net asset value of 105p per share — the shares are currently priced at 114p, for a price-to-book value ratio of a bit less than 1.1, which looks attractive to me.
A forward P/E of 18 for 2018 might look a bit high compared with the FTSE average, but with the new development plan in place, the value of Empiric’s property portfolio rising, and those high and progressive dividends looking solid, I reckon the shares are good value now.
