The recent market crash could lead some investors to refocus their capital on assets such as gold. However, over the long run, assets such as the Standard Life Aberdeen (LSE: SLA) share price could produce much higher returns.
As such, buying a share of this business while it’s at a low level today could be a sound long-term investment strategy.
Standard Life Aberdeen on offer
Due to concerns about the company’s near-term outlook, investors have been selling Standard Life Aberdeen in 2020. Shares in the asset and pensions manager have fallen by around 31% this year.
However, despite the economic uncertainty brought about by the coronavirus crisis, recent trading updates from the business show it’s enjoying healthy operating conditions.
In a statement published ahead of its annual general meeting at the beginning of May, the company reported that assets under management were £490bn at the end of April. Estimated net outflows for the first four months of the year were £24bn. The total included £25bn of outflows related to the loss of the Scottish Widows asset management agreement. This has been in the pipeline since the beginning of 2018. Excluding this withdrawal, the group saw £1bn of inflows during the first four months of 2020.
The fact Standard Life Aberdeen managed to attract new investor money during one of the most volatile periods in the markets for decades is a positive signal.
For years, the company has been grappling with investor outflows. Indeed, this was one of the reasons why Standard Life decided to merge with Aberdeen Asset Management several years ago. This trend now seems to have come to an end.
In the AGM trading update, Standard Life Aberdeen also reaffirmed its commitment to its current dividend. At the time of writing, the stock supports a dividend yield of 9.4%. This is nearly double its long-term average.
A dividend yield above a company’s long-term average can indicate the stock is undervalued. With this being the case, shares in Standard Life Aberdeen may offer a wide margin of safety at current levels.
The payout is supported by the company’s strong financial position and ownership of several subsidiaries around the world. These include its Indian business HDFC Life. Management is steadily disposing of its stake in this enterprise and returning the cash to investors with share buybacks.
The fact the company has stated its dividend is safe for the time being, may also mean the stock becomes more popular among income-seeking investors at a time when many large-cap shares are cutting their dividends.
This factor, combined with the fact the company is seeing an inflow in new investor money, which could lead to an increase in profits in the years ahead, may lead to strong total returns from the stock.
This combination of factors could help Standard Life Aberdeen outperform gold over the long run.
But if you're worried about the outlook for the financial sector in general it may be a good idea to spread your risk across several FTSE 100 investments.
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Rupert Hargreaves owns shares in Standard Life Aberdeen. The Motley Fool UK has no position in any of the shares mentioned. 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.