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Like many traders, I benefit from the passive revenue streams I can earn from proudly owning dividend shares. One FTSE 250 share I used to personal has had a troublesome 12 months, with its share worth falling over a fifth in simply 12 months. That has pushed its dividend yield as much as 10.8%.
A yield of virtually 11% actually grabs my consideration. However, as many traders have discovered the onerous means, no dividend is ever assured.
So might this be a discount to snap up for my portfolio – or a price lure which may but fall additional?
Unconvincing dividend report
The share in query is the daftly named abrdn (LSE: ABDN).
Whereas previous efficiency isn’t essentially a sign of what to anticipate in future, abrdn’s dividend historical past does instantly set an alarm bell ringing in my head.
The dividend has been held flat since 2020. That 12 months noticed a lower of round one third within the annual dividend per share. Previous to that, the atypical dividend per share had been held flat for one 12 months however earlier than that it had been rising yearly for a couple of years.
Earlier than moving into the small print of the enterprise, that sample alone makes this sound probably like a state of affairs the place an organization has been unrealistic about its long-term dividend capability, tried to keep away from a lower by holding it regular, after which confronted the inevitable by lopping a giant chunk off the payout.
Dividend potential – but in addition some clear dangers
Is that what has occurred at abrdn? To some extent, I feel sure — and it could truly underplay the continued challenges the FTSE 250 agency could face in sustaining its payout.
Final 12 months, the dividend of 14.6p per share was not coated by diluted earnings of 0.1p per share. The 12 months earlier than had seen an even bigger hole, with the identical dividend per share however a diluted loss per share of 26.6p.
In the meantime, final 12 months noticed internet money inflows from working actions double, to £221m. However that dividend was costing the corporate £267m, considerably greater than its working revenue. That raises a crimson flag for me in regards to the sustainability of the payout.
abrdn continues to battle dangers reminiscent of traders pulling out more cash than they put in. In its most up-to-date quarter, institutional and retail wealth property below administration and administration shrunk barely.
Set towards that, the corporate’s interactive investor division reported greater property below administration and administration, in addition to a internet influx of consumer funds. By constructing its digital footprint, abrdn is hoping to get on a development trajectory as soon as extra. If that may assist it generate additional cash, the dividend could find yourself being safer than it at the moment appears.
I’m not prepared to purchase
Nonetheless, that continues to be to be seen. abrdn has plenty of work nonetheless to do and the outlook for investor demand within the subsequent a number of years is unclear.
With rising residing prices and a weak financial system, I see a threat of outflows from the kinds of funds supplied by abrdn.
So whereas the excessive yield is attention-grabbing, for now I cannot be including this FTSE 250 share to my ISA.
