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It may be tempting when on the lookout for dividends simply to give attention to the excessive yields within the flagship FTSE 100 index. Notable examples right here embody Phoenix Group’s 9.4% and the ten.2% at M&G. However the FTSE 250 index additionally incorporates some high-yield shares of word.
One is asset supervisor aberdeen group (LSE: ABDN), with its 9.8% yield.
The dividend historical past right here just isn’t thrilling. Thedividend per share has been held flat for years after the newest minimize.
However previous efficiency just isn’t essentially a information to what is going to occur in future. If the FTSE 250 agency merely maintains its dividend per share with out growing it, its potential yield is 9.8%. That definitely appears engaging to me.
Promising indicators of restoration
I’ve been eyeing aberdeen shares as a possible addition to my portfolio for a while. However I’ve lengthy been involved concerning the relatively lacklustre, inconsistent enterprise efficiency and what it means for the dividend.
In spite of everything, as long-term aberdeen shareholders know solely too effectively, no dividend is assured to final.
However final 12 months’s efficiency offered some indicators of a enterprise which may be on the mend. Web consumer fund flows have been nonetheless unfavourable, however a lot smaller than the prior 12 months. Nonetheless, I see a danger that if buyers proceed to withdraw greater than they put in, it might harm aberdeen’s long-term profitability.
Web capital technology was up by round a 3rd, which I see as a optimistic signal for sustaining the dividend. Diluted earnings per share additionally moved up strongly.
Nonetheless, the purpose about outflows considerations me. It helps clarify why adjusted working internet income confirmed a 6% year-on-year decline.
Not out of the woods but
So, though the outcomes contained some promising indicators of progress, I feel administration has work left to do.
One of many key duties is reversing the web move of funds, in order that aberdeen is coping with bigger not smaller quantities of cash general. I see that as useful for earnings over the long term.
If the FTSE 250 enterprise can enhance its internet capital technology, that may assist enhance dividend protection. I feel that in flip may be good for the share value, which has fallen 21% over the previous 5 years. That contrasts very badly to a 39% enhance for the FTSE 250 index general throughout that interval.
aberdeen expects to extend internet capital technology to round £300m subsequent 12 months, a rise of roughly 1 / 4 from 2024.
I really feel more and more assured that aberdeen will preserve its dividend. Certainly, in its outcomes the corporate’s chief govt stated that its technique should allow aberdeen “to maintain the historic dividend per share from materially higher, and sustainable capital generation.”
However whereas the enterprise efficiency appears to be shifting in the precise course, I would really like extra proof that the shift is sustained and sustainable.
So, as a substitute of shopping for now, I’ll proceed to maintain aberdeen on my watchlist. I’ll look to see whether or not it is ready to preserve excessive internet capital technology and likewise transfer from unfavourable to optimistic internet fund flows.
