New figures from Charles Stanley show how investors get a much better return from shares. If you had invested £10,000 in global markets in 2010 the money would now be worth £30,742. In a savings account, it would have grown to just £11,230. I’m hoping the following two FTSE 100 stocks will make my money work far harder than any savings account.

While many FTSE 100 stocks scrapped their dividends during the early stage of the pandemic, Edinburgh-based fund manager Standard Life Aberdeen (LSE: SLA) made a virtue of standing by its shareholder payouts. Chairman Sir Douglas Flint acknowledged that many of its small shareholders rely on a dividend cheque, and felt a duty to pay them if possible. Better still, the company was in a position to do so. It has £1.7bn of cash reserves, recently bolstered by the sale of its £237m stake in Indian financial services firm HDFC Life.

I’d buy this dividend hero today

That gives me the confidence to believe that Standard Life Aberdeen will remain a reliable income payer. The forward yield is currently 6.1%. However, payouts could be reduced in future, as the yield is only covered 0.8 times by projected earnings. Even if it is trimmed back, this top FTSE 100 income stock should still offer attractive income.

The Standard Life Aberdeen share price has recovered steadily since March, despite recently reporting a 30% drop in first-half profits. Assets under management fell due to market declines and customers exiting for safer assets, but this has been an exceptional year. If the vaccines do their work, 2021 should be better. Whenever the recovery comes, I believe Standard Life Aberdeen will still give me long-term income and growth.

Another FTSE 100 financial services stock, insurance consolidator Phoenix Group Holdings (LSE: PHNX) offers an even more generous forward yield of 6.6%. Better still, it is covered 1.8 times by earnings. It has also recovered strongly from this year’s stock market crash, climbing 50% from its March lows.

I’d check out this FTSE 100 stock too

Earlier this month, Phoenix reported beating its cash generation target for 2020, after generating £1.71bn compared to £707m in 2019. It already had a strong balance sheet, but has increased its Solvency II surplus by another £600m in the three months to 30 September. It may raise a further £578m amid reports that buyers are circling its Irish and German operations.

Phoenix isn’t even expensive, trading at just 8.4 times forward earnings. That gives me another reason to buy it rather than leaving my money idling in cash. Yes, this has been a tough year for FTSE 100 dividend stocks, but as these two financial services companies show, the income is still out there.

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Harvey Jones has no position in any of the shares mentioned. 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.

Today, Standard Life Aberdeen (LSE: SLA) gives you dividend income of 8.22% a year. That is incredible, especially when you consider the alternatives. Such as leaving your money to die a slow death inside a Cash ISA.

Generating growth and income from FTSE 100 dividend stocks like this one is a great way to build your long-term wealth. You can reinvest the dividends while you are still working, and draw them as income in retirement.

The Standard Life Aberdeen share price recovers

I would much rather invest in Standard Life Aberdeen than leave my long-term wealth inside a Cash ISA. At the start of the year, the average easy-access Cash ISA paid a derisory 0.85%, according to Moneyfacts. Today, savers get just 0.45%. That is beyond derisory.

The Bank of England is likely to keep interest rates near zero for years. This means there is no respite in sight for savers. You can try shopping around for a best-buy Cash ISA, but banks and building societies now pull their top deals quickly, after being swamped with demand. High street banks aren’t even competing for your savings.

Investing in FTSE 100 shares is riskier than leaving money in cash. At least in the short term. Dividends are not guaranteed either. Almost half of all FTSE 100 companies have cut or suspend their shareholder payouts, during the pandemic.

By contrast, Standard Life Aberdeen has stood by its payout, which has helped to support its share price.

This FTSE 100 income stock aims to please

In April, chairman Sir Douglas Flint made a clear statement of responsibility to shareholders, saying: “Many of our small shareholders rely on a dividend cheque. I think if companies can maintain their dividend in times like these, then it helps enormously.”

That is why I find Standard Life Aberdeen so irresistible today. It offers one of the highest yields in the UK, and feels a duty to pay it when possible. Better still, Flint said the group can afford it.

No wonder the Standard Life Aberdeen share price is up 20% in the last month. With dividend income in short supply, the attraction is clear. Its performance is particularly impressive given that asset managers typically struggle in a downturn. The reason is obvious. Funds perform poorly, and custom outflows rise.

This also makes them a good way to play the recovery. The Standard Life Aberdeen share price is on the up. While markets are likely to be volatile, as the global economy eases out of the lockdown, the long-term outlook should be brighter.

For the Cash ISA by contrast, the future looks grim.

The post Forget the Cash ISA! I’m backing the Standard Life Aberdeen share price for its 8% yield appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. 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.

If companies can’t generate enough cash to cover their shareholder payouts, something has to give. A number of major FTSE 100 companies have cut their dividends in recent years, including Centrica, Vodafone and SSE, and when they do, investor sentiment takes a severe knock. The Standard Life Aberdeen (LSE: SLA) share price and yield both look in fine form at the moment, the question is whether this can last.

Standard Life Aberdeen is the UK’s largest fund manager, after being created by the merger of Standard Life and Aberdeen Asset Management in 2017. The hook-up didn’t quite go to plan, especially after Lloyds withdrew its £109bn Scottish Widows mandate as a result, although this has since been partially restored, until at least April 2022.

On the mend

The merger was designed to release synergies and generate cost savings but, so far, the benefits have been slow to come through, with earnings fallings and investor funds flowing out. The Standard Life Aberdeen share price has started to recover, rising an impressive 40% over the last year, at a time when the FTSE 100 fell.

The £7bn group’s most recent results, for the first half of the 2019 financial year, showed adjusted profit falling around 10% to £280m, largely due to net outflows in 2018 and 2019, which hit fee-based revenues. On the plus side, total assets under management rose 5% to £577.5bn.

Management is working hard to drive further efficiencies, and has also been lavishing shareholders with rewards, including share buyback programme totalling £750m, which has boosted earnings per share.

The forecast yield of 6.7% is particularly eye-catching but, my gosh, isn’t cover thin at just 0.9? You have to question whether the dividend is sustainable at this level. In fact, people have been asking that question for the last couple of years.

Time to take cover

Cover looks set to stay thin, by my calculations. By the end of 2021, the dividend is forecast to be 21.76p, against anticipated earnings per share of 20.86p. This will put cover at 0.96, only marginally healthier than today.

A further worry is that, after a 10-year bull run, markets could be starting to get choppy. Standard Life Aberdeen’s management knows this, previously warning that the current environment for asset management remains tough as macroeconomic and political uncertainties knock investor sentiment. That was written long before the coronavirus menaced markets.

There always will be macroeconomic and political clouds, and if you wait for clear blue skies, you’ll never invest in a stock like this. Unfortunately, today’s concerns aren’t reflected in the stock’s valuation of 16.9 times forward earnings, which is relatively high for a company that still has to find its feet, and has a question mark hanging over its dividend.

Not for me, at the moment.

The post Standard Life Aberdeen’s 6.7% yield looks an unmissable buy to me. Here’s what I’d do appeared first on The Motley Fool UK.

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• 4 FTSE 250 shares that could generate a 4-figure monthly second income
• How can I target £14,132 a year in dividend income from a £20,000 holding in this FTSE 250 dividend gem?

Harvey Jones has no position in any of the shares mentioned. 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.

It’s been a pleasure to look back since both have seen their share prices rise by a third in the last 12 months. Can they repeat the trick in 2020?

Standard Life Aberdeen

One reason that FTSE 100 asset manager Standard Life Aberdeen (LSE: SLA) caught my eye was a lowly valuation of just 6.7 times earnings, which I thought was far cheaper than it should be, despite the undoubted challenges facing the group. At the time, its share price had collapsed by around half, but this year the only way has been up.

The merger between Standard Life and Aberdeen Asset Management took time to prove its worth, especially since the group lost a £109bn mandate to run funds for Scottish Widows on behalf of Lloyds (an appeal was partially successful).

Stock markets have risen strongly this year, which is always good news for fund managers, and Standard Life Aberdeen posted both a drop in outflows and rise in assets under management. Despite that, first half figures showed profits before tax falling around 10% to £280m, partly offset by a drop in operating expenses.

The £7.17bn group has been strengthening its position by launching new funds and expanding in Asia, but much will depend on how stock markets perform over the year ahead. The going could be tougher, as global growth slows and geopolitical worries mount, although I don’t expect a crash.

Its forward valuation now looks a little toppy at 16.9 times earnings. It does offer an attractive yield of 7% but cover is thin at just 0.8, and low forecast earnings growth completes the mixed picture. Standard Life Aberdeen looked like a buy last year, but a hold today.

RWS Holdings

My other tip was language, intellectual property support, and localisation provider RWS Holdings (LSE: RWS). This was hugely expensive when I tipped it, trading at 26.9 times forward earnings, partly due to a 60% rise in its share price over just two years. However, it has thoroughly justified this valuation, rising 36% since I tipped it.

This acquisition-hungry AIM-listed company had developed the appealing habit of delivering double-digit earnings growth, up 35%, 31%, and 22% in the three years to 30 September 2018. It maintained that performance this year, posting another 22% earnings growth.

December’s full-year results showed record performances across all three of its main businesses, with revenue up 16% to £355.7m, while adjusted operating profit climbed 18% to £78.4m.

The attractive picture was completed by a 43% drop in net debt to £36.8m and a 17% rise in the total dividend for the year to 8.75p. This £1.71bn group may not look like an income seeker’s dream, with a forward yield of 1.7%, but a progressive management attitude and dividend cover of 2.4% means it shouldn’t be underrated.

My worry is that it is even more expensive today, trading at 31.7 times forward earnings, and earnings growth is predicted to slow to ‘just’ 8% this year. Today I’d call RWS a satisfactory hold, rather than a great screaming buy.

The post I tipped a FTSE 100 bargain and an AIM star to thrash the market. Can they do it again? appeared first on The Motley Fool UK.

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• 4 FTSE 250 shares that could generate a 4-figure monthly second income
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Harvey Jones has no position in any of the shares mentioned. 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.

The cruise operator has had a mixed year in 2019. Hurricanes in the Caribbean, volatile fuel prices and the reinstatement of a travel ban between the United States and Cuba have all weighed on the company’s earnings.

Falling earnings

Indeed, at the beginning of the year, City analysts were expecting the company to report earnings per share of around $4.80 for 2019. But after factoring in all of the above, analysts are forecasting earnings of just $4.20 for the year.

Nevertheless, growth is projected to return in 2020. With this being the case, I think now could be an excellent opportunity for investors to snap up its shares at a highly attractive price.

Right now, shares in Carnival are changing hands at just 6.6 times forward earnings, its lowest valuation in five years. What’s more, more shares in the world’s largest cruise operator also support a dividend yield of 4.9%.

The company is also returning cash to investors with share buybacks. Over the past six years, Carnival has acquired around 10% of its outstanding shares.

So all in all, considering the company’s low valuation, market-beating dividend yield, and the potential return to growth next year, I think it’s worth buying Carnival before Christmas.

Turnaround taking shape

Another FTSE 100 income stock I’m interested in right now is Standard Life Aberdeen (LSE: SLA). Just like Carnival, Standard Life’s growth has ground to a halt over the past 12-24 months. As a result, the market has been quick to dump the shares.

However, over the past six months, signs of a turnaround have started to materialise. While the company’s third-quarter results showed a slight dip in adjusted pre-tax profit to £280m for the first six months of 2019, down from £311m in the same period last year, assets under management increased 5%, jumping from £552bn at the end of last year to £578bn this year.

This is good news because it seems to suggest outflows from its funds have slowed. And while profits are still falling, the fact investor outflows have slowed indicates a recovery could be taking shape.

I think we will see the first signs of a full recovery next year. For that reason, I would buy Standard Life before Christmas. 2020 will be a big year for the group as it’s planning to complete the integration of the Aberdeen Asset Management business and achieve cost savings of at least £350m.

When the integration is complete, management can concentrate on returning the enlarged group to growth, and I believe this plan will start to take shape next year.

In the meantime, investors can sit back and enjoy the dividend yield of 7% that shares in the financial services group currently offer.

The post Two FTSE 100 dividend stocks I’d buy before Christmas appeared first on The Motley Fool UK.

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• How can I target £14,132 a year in dividend income from a £20,000 holding in this FTSE 250 dividend gem?

Rupert Hargreaves owns shares in Carnival and Standard Life Aberdeen. The Motley Fool UK has recommended Carnival. 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.

The following two pay even more than that, around 7%. Better still, if you buy them inside a Stocks and Shares ISA, you can take that income completely free of tax.

HSBC Holdings

Banking stocks are once again a happy hunting ground for dividend investors, particularly Asia-focused HSBC Holdings (LSE: HSBA), which currently offers a mighty forward yield of 6.8%, covered 1.4 times by earnings. Management has been fairly progressive, increasing the payout seven times in the last 10 years. So, with luck, you’ll be locking into a rising income as well.

A dividend of this size can make investors cautious, as they fear it may not be sustainable. This isn’t a major concern with HSBC which, in August, reported an 18.1% rise in first-half profit, after tax, to $9.9bn. Reported revenues also rose 7.6%, and reported operating expenses fell 2.3%. Flush with cash, it’s shortly initiating a $1bn share buy-back.

Growth is a different matter. The HSBC share price trades at similar levels to five years ago, despite a 15% rise on the FTSE 100 over that time. The £123bn giant is facing headwinds in its key Asia division, which have been worsened by the US-China trade war. Brexit has also added a layer of uncertainty, and falling interest rates are squeezing net interest margins.

Much of these concerns are priced into a low forward valuation of just 10.6 times earnings, giving investors a nice safety margin. As an income seeker, you can watch the dividends roll in, and let the share price take care of itself over the longer term.

Standard Life Aberdeen

The Standard Life Aberdeen (LSE: SLA) share price has also had a disappointing run, trading 26% lower than five years ago. You can put much of that down to teething problems over the recent merger, which backfired as Lloyds threatened to pull its £109bn Scottish Widows mandate as a result. This could cost the new group hundreds of millions in fees, offsetting many of the cost savings and synergies.

The dispute was settled in July, largely in the group’s favour, as Lloyds was ordered to pay £140m in compensation, while Standard Life Aberdeen will hold on to a third of its mandate until at least April 2022.

In August, management reported that “lower redemptions and better markets” helped boost assets under management by 5% to £577bn in the first half. The group is now spreading its wings globally, expanding in two massive markets – India and China.

The Standard Life Aberdeen share price has actually risen 15% in a month, helped by an improvement in wider stock-market sentiment. Investors had also braced themselves for a dividend cut that never came.

The forecast yield is a whopping 7.6%, but cover does look thin at 0.9, so there’s a chance the dividend could prove vulnerable. Trading at 15.5 times forward earnings, a fair bit higher than HSBC, this isn’t a bargain.

Given these two concerns, HSBC would be my preferred pick.

The post Looking for income? I’d buy these 2 FTSE 100 stocks which yield 7% tax free in an ISA appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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.

In this article, I’ll discuss why its shares soared, and give my view on its current valuation and prospects.

Strong bounce-back

SLA had been one of the worst performers in August (a 17% fall versus a market decline of 5%), following underwhelming half-year results, so the strong bounce-back in September came as a welcome relief for investors.

There wasn’t actually much in the way of news from the company during the month. A mundane announcement of a new non-executive director joining the board was about it. All was quiet on the broker research and recommendations front too. And yet the shares headed resolutely upwards from August’s closing price of 249.3p to 285.8p on 30 September.

Share buyback

I think the rise was partly due to a general improvement in sentiment across the market, and partly due to a £200m share buyback programme SLA had announced on 16 August. Its shares made a bit of headway in the latter half of August, and gained momentum through September, as it bought back and cancelled over 21m shares, reducing its number of shares in issue by 0.9%.

Such programmes tend to be supportive of the share price, because each remaining share is worth that little bit more, representing a slightly bigger slice of ownership of the business.

Whirlwind October

The first few days of October have been rather more eventful. On Wednesday, SLA announced that Martin Gilbert — group vice-chairman and co-founder of Aberdeen Asset Management 36 years ago — will be stepping down next year.

Meanwhile, the company’s continuing share buybacks provided no protection in the face of the broad stock market sell-off this week. The shares finished yesterday at 269.3p, down 5.8% from Monday, compared with a 4.5% drop in the FTSE 100.

Valuation

SLA trades at 14.4 times this year’s forecast earnings per share of 18.75p. The company has seen persistent fund outflows since Standard Life merged with Aberdeen in 2017, so the earnings multiple doesn’t seem particularly generous. A prospective yield of 8% on a targeted maintained dividend of 21.6p is generous, but you’ll note that the payout is uncovered by earnings.

The disposal of the group’s insurance business, and the freeing-up of regulatory capital that backed it, means SLA’s balance sheet can support the dividend — as well as share buybacks — for some time, if it chooses to continue doing so.

Uncertainty

However, I do wonder whether the aforementioned Martin Gilbert is ‘retiring’ or ‘being retired’, and whether chairman Sir Douglas Flint (ex-HSBC), who only joined the company this year, could be embarking on a boardroom shake-up of this underperforming business.

There’s been quite an exodus of personnel since Standard Life and Aberdeen, which had rather different cultures, merged. And I note recent news that co-head of multi-manager strategies James Millard has now left the business.

On balance, in the absence of evidence of stability at the company and the stemming of fund outflows, I’m inclined to see SLA as a stock to avoid.

The post Why the Standard Life Aberdeen share price rose 15% in September appeared first on The Motley Fool UK.

More reading

• 4 FTSE 250 shares that could generate a 4-figure monthly second income
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G A Chester has no position in any of the shares mentioned. 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.

In this article, I’ll discuss why it performed so poorly, and its current valuation and prospects. Let’s start by summarising the key features of the month:

• Shares ended July at 298.8p.
• 7 August — H1 results (after weakness in the run-up to the results, the shares fell 7.5% on the day from 281.8p to 260.6p).
• 14 August — company announced it had sold £374m of shares in HDFC Life of India, reducing its stake in the insurer to 19.7% from 23%.
• 15 August — shares made a low for the month of 238.1p.
• 16 August — company announced a share buyback programme of up to £200m of shares by 16 January 2020.
• Shares rallied a little through the latter half of the month to end at 249.3p.

Disappointing results

SLA’s first-half numbers came in below City expectations. Assets under management increased 5% to £577.5bn, but this was thanks to favourable markets.

The group continued to see clients pulling cash from its funds, with net outflows of £15.9bn. This was an improvement on £16.9bn in the first half of last year, and £24bn in the second half, but worse than the £13.4bn the market had expected. A 10% drop in pre-tax profit to £280m also missed market expectations of £288m.

Moving in the right direction

Client withdrawals have dogged the company since Standard Life merged with Aberdeen in 2017. However, more positively, cost efficiencies from the merger are on track — £234m delivered so far of the £350m per annum targeted — and investment performance of the group’s funds has improved recently.

The company told us 65% of assets under management are now above benchmark over three years, compared with 50% at the end of 2018. Further improvement is needed, if outflows are to be reversed, particularly in the higher-margin equity and multi-asset funds where performance has been weakest. However, with overall performance moving in the right direction, and other areas of the group’s business doing well, including its financial adviser platforms, I can see cause for optimism.

Risk/reward

The company is well capitalised, with £0.9bn of surplus regulatory capital. It also has valuable non-core assets, such as the aforementioned stake in HDFC Life from which it realised £374m with the partial sale in August.

The strong balance sheet can support investment, share buybacks (the programme announced in August isn’t the first) and dividends for some time to come, even though the dividend is currently uncovered by earnings. The board’s intention is to hold the payout at 21.6p “while the business is restructured, cost synergies are delivered and future financial performance confirms the sustainability of this level of distribution and provides line of sight to its future growth.”

At the current share price, the yield on offer is 8.6%. Buyers of the stock today are paying 13.4 times this year’s forecast earnings, with City analysts expecting earnings growth to kick in next year. On balance, I think the risk/reward ratio here is favourable, and I rate SLA a ‘buy’.

The post Why the Standard Life Aberdeen share price fell 17% in August appeared first on The Motley Fool UK.

More reading

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G A Chester has no position in any of the shares mentioned. 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.

Unfortunately, it doesn’t look as if the outlook for this business is going to improve any time soon. Here are the three reasons why I believe the Standard Life share price could keep falling.

Investor exodus

When Standard announced the company was merging with emerging markets-focused asset manager Aberdeen Asset Management two years ago, management expressed optimism that investors would rush to buy into the enlarged group.

That just hasn’t happened. The fund manager had £15.9bn of net outflows in the first half of 2019, an improvement on the £24bn of outflows in the second half of last year, but still above analysts’ expectations.

It doesn’t look as if this trend is going to improve anytime soon. The relatively high cost of Standard’s products coupled with a poor investment performance leads me to conclude investors will continue to pull money from the business for the foreseeable future.

Falling profits

Less money to manage means lower fees for Standard. Despite achieving nearly £234m of the annual £350m cost savings it had promised from the Aberdeen merger, Standard’s adjusted profit before tax was £280m in the first half of 2019, down from £311m for the same period of 2018.

This time last year, City analysts were expecting the company to report earnings of 29p per share for 2019. Now they’re forecasting profits of just 18.9p per share.

Growth is forecasst to return in 2020 but, based on past performance, I’m not going to hold my breath. I wouldn’t be surprised if the company misses forecasts once again next year if outflows continue to weigh on profitability.

High price

I might be able to forgive all of the above if shares in Standard were appropriately priced, but they’re not. At the time of writing, shares in the asset management business are dealing at a forward P/E 12.9, compared to the industry median of 13.3.

Considering the company’s bleak growth outlook and investor outflows, I think the stock deserves to trade at a substantial discount to the rest of the asset management industry. At the current price, it looks to me to be fully valued.

Conclusion

So those are the three reasons why I think the Standard Life share price could keep crashing. However, while I’m not overly optimistic about the company’s short term outlook, I think in the long term, this business will perform well. Its strong brand and experienced managers should help the group pull through the current turbulence and emerge stronger on the other side.

Sweetening the deal is a dividend yield of 8.6%, an attractive level of income for patient investors who are willing to wait for the turnaround.

The post 3 reasons why the Standard Life share price could keep crashing appeared first on The Motley Fool UK.

More reading

• 4 FTSE 250 shares that could generate a 4-figure monthly second income
• How can I target £14,132 a year in dividend income from a £20,000 holding in this FTSE 250 dividend gem?

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.

These two FTSE 100 stocks both yield more than 8%, beating the average buy-to-let. They’re a lot easier to buy and manage than bricks and mortar, too, although they aren’t without risks.

Micro men

Software group Micro Focus International (LSE: MCRO) has had a bumpy time lately, as it struggled to swallow its 2017 acquisition, HP Enterprise’s software business. It started the year brightly but has since dimmed, falling 15% in the last three months as investors reacted to chairman Kevin Loosemore’s decision to dump half his stake for £11.6m. He may still hold half his wealth in the company, but it still doesn’t look good.

Micro Focus is nonetheless showing promise, with profits for the six months to 30 April more than doubling from $619.7m to $1.4bn. Revenues dropped 5.3% to $1,65bn but markets took that on the chin as they were in line with guidance.

Stay Focused

One attraction of the Micro Focus share price is its low forecast valuation of just 9.6 times earnings. The current yield is 9.4%, although that is forecast to fall to a still respectable 6%, as the group held its interim dividend at 58.33 cents per share.

The payout has healthy cover of 1.9, while the group’s cash conversion has been strong, with free cash flow of $429.9m in the last six months, double last year’s number. A return on capital employed of almost 60% is also impressive. The group has a market cap of £5.8bn, which makes its net debt of £3.12bn look relatively high. However, it is feeling flush enough to offer $200m of share buybacks over the months ahead, potentially with more to follow.

A new Standard

I’d also like to highlight another high-yielder, asset manager Standard Life Aberdeen (LSE:SLA), which has set itself the task of being “a world-class investment company” but isn’t quite there yet. It also started the year well only to flounder after posting a £31m drop in first-half profits to £280m earlier this month, even though assets under management and administration climbed 5% to £577.5bn.

Stock markets could be in for a bumpy time, which is never good for asset managers, but at least you aren’t overpaying with the stock trading at 13.3 times forward earnings. The Standard Life Aberdeen yield is still forecast to be a dizzying 9%, even if cover is low at 0.9, which means the payout isn’t fully covered by revenues.

And that’s Life

Earnings per share forecasts look flat for the next couple of years, and Roland Head recently struck a sceptical note, arguing that the group’s shift into emerging markets, notably China, isn’t guaranteed to pay off.

The Standard Life Aberdeen yield is still highly tempting. Analysts don’t expect the current payout to rise from here, but they’re not predicting a cut either, so today’s heady income will hopefully endure.

The post Forget buy-to-let! I’m tempted by these 2 high-yielding FTSE 100 dividend stocks appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. 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.