Even though Standard Life Aberdeen (LSE: SLA) may not be having the best of it right now, I am convinced the financial colossus has what it takes to deliver stunning investment returns in the years ahead.
In its mid-December market update, the newly-created FTSE 100 firm advised that fund outflows continued in the third quarter, continuing the trend seen in the first six months of 2017.
The business said that net outflows clocked in at £23bn during January-September, meaning that total assets under management registered at £646.2bn at the end of the period. This was down from £647.6bn at the beginning of the year.
Investors are pulling their money out of Standard Life Aberdeen because of concerns over stashing their cash in just one company, particularly one which has just come into existence.
It may take some time to convince these customers, but in the long run I reckon the fund management giant has a terrific future — the £11bn merger back in August has built a business with terrific scale, splendid cross-selling opportunities, and excellent exposure to both the UK and developing markets.
Dynamite dividend yields
Not that City analysts believe it will take long for Standard Life Aberdeen to deliver knockout earnings growth, mind. Indeed, profits rises of 59% and 9% are predicted for 2017 and 2018 respectively, meaning the company changes hands on a mega-cheap prospective P/E ratio of 14 times.
This — combined with the investment specialist’s exceptional cash generation — underpins dividend projections of 21.7p for this year and 23p per share for 2018. And as a result Standard Life Aberdeen carries mighty yields of 5.2% and 5.5% for this year and next.
A smart selection
In the year to January 2018, the retail play is expected to hike the dividend to 6.2p per share from 5.89p in the prior period, underpinned by a 6% earnings rise and resulting in a mammoth 7.4% yield.
Another 2% profits rise is predicted for fiscal 2019, too, and as a consequence the dividend is expected to step to 6.5p, nudging the yield to an even-better 7.7%.
And like over at Standard Life Aberdeen, stock pickers can take extra security from Moss Bros’ strong balance sheet, giving current forecasts additional weight. The company had £21.5m of cash on its books as of July and zero debt.
Of course, Moss Bros is not immune to the macroeconomic pressures washing over the broader retail sector.
But so far the suit specialist is managing to keep its head above water, the massive investments it had made in refreshing its store network, as well as improving its digital operations, continuing to deliver revenues growth. Indeed, the business saw like-for-like sales improve 2.8% during the six months to July, a result that helped pre-tax profit leap 15.7% year-on-year to £4.2m.
Whilst Moss Bros may struggle to deliver the brilliant earnings growth of yesteryear in the current climate, in my opinion a prospective P/E ratio of 14.7 times still makes it worthy of attention.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Life Aberdeen. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.