In the past year, the stock market has performed well, and the benchmark FTSE 100 The leading company index increased by 22%.But financial services company Abden (London Stock Exchange: ABDN) During the same period, it only increased by 4%. It has been falling recently and has fallen by more than one-fifth of its value since March. Here, I look at the reasons for the decline in Abrdn’s stock price and whether I should add it to my portfolio.
Abrdn’s operating performance
Abrdn is an investment company, so to some extent, its wealth is closely related to the health of the financial services industry. But in the past year, many financial services companies have outperformed Abrdn. JupiterFor example, it rose by 7%, and Schroeder An increase of 25%.
Abrdn’s stupid rebranding (from Standard Life Aberdeen, July) received mixed reactions. But this does not explain the sluggish stock price performance. I also don’t think its recent financial performance is terrible. In fact, I would say that the business has been performing well. In its half-year performance, the company’s reported fee income increased by 7%. It also has a greatly improved profit chart. For example, adjusted operating profit increased by 52% compared to the same period last year.
It is true that the assets under management have declined slightly. But in general, I think the results show that the company is heading in the right direction. It maintains its outlook for the full year and expects to further reduce its cost-to-income ratio.
Dividends and Abrdn share price
But not everything is good. The interim dividend remains unchanged. But the total dividend is “re-locate“. Last year’s final dividend was almost halved. Therefore, although the most recent interim dividend has not fallen — or increased, for that matter — the company said it plans to pay a total annual dividend of 14.6p. In other words, the final dividend will remain indefinitely last year. The downward adjustment level.
This may not last forever. The company said that once the coverage ratio reaches 1.5 times the adjusted capital generation, it intends to start raising dividends again. During the half-year period that ended recently, the coverage level on this basis was 1.14. Although this is gratifying because it means that the bonus has been covered, it is still some distance away from the target. If coverage continues to remain at the current level, it may even take several years before Abrdn can consider increasing its dividend again. Dividends can never be guaranteed, so if the business is in trouble, dividends may fall further.For example, if Decline in assets under management accelerates, Which may harm expense revenue and profits.
Why I like Abrdn’s stock price
However, it is also worth noting that even after last year’s cuts, Abrdn’s current dividend yield is still 5.7%.That is Lower than some industry peers like Law and General with Morning light – But still much higher than the average return of FTSE 100 index members such as Abrdn.
In addition to revenue, the company is also very attractive to me, including a well-established customer base and a strong brand, including Standard lifeIf the economy shrinks, customers may reduce their investment, and Abrdn’s profits may fall. However, even after weighing the risks, I think the current Abrdn stock price provides me with a buying opportunity. I will consider adding it to my portfolio.
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Christopher Ruane has no position in any of the stocks mentioned. Motley Fool UK recommended Jupiter Fund Management and Schroders (no voting rights). The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a variety of different insights, We are better investors.