Jupiter Fund Management
5.9% forward dividend yield
Given the bloodbath on world equity markets in the third quarter, with the FTSE 100 index, for example, off by 7 per cent during the period, the performance off Jupiter Asset Management was not that bad. Unlike Aberdeen Asset Management, say, Jupiter is not that exposed to emerging markets.
Of the £30-odd billion of funds under management, about a third ended the quarter in positive territory. Setting aside market movements, the only significant outflow was in segregated mandates, where the company manages funds on behalf of individual clients rather than for a range of them. This was a consequence of its own success, the funds having done sufficiently well that those clients decided to take some profits and shift money elsewhere to rebalance their investments.
Jupiter is a relatively easy investment to understand. Expansion comes from gradual entry into new territories, such as Italy where it goes live by the end of the year, which is relatively inexpensive. The company is not much inclined to get involved in the mergers and acquisitions activity taking place elsewhere in the sector.
The long-term drivers for the business include the trend towards greater self-investment, which itself is driven by changes to UK pension rules.
The debt built up when it was bought out of Commerzbank in 2007 is now paid off and the company is expected to recycle the vast majority of cash that piles up back to investors, both as ordinary dividends and as special payments. With about a fifth of the shares still in the hands of employees, this makes sense in terms of incentivising them.
The shares, up 1¼p at 428¼p, have not done much over the summer, but have avoided the precipitate falls endured elsewhere in the sector. They offer an attractive yield, approaching 6 per cent on any reasonable assessment of this year’s payment, although in the past analysts have had difficulty making a useful forecast.
That means, as one said yesterday, that you are getting a reasonable income to wait for those long-term benefits to kick in. I have recommended the shares before and happily do so again.
My advice Buy long term
Why Jupiter is as well placed as any to benefit from growth in the sector, while the shares have the support of a good dividend yield
Polar Capital Holdings
$10.9bn AUM at 30 September
Polar Capital is at the other end of the fund management spectrum to Jupiter. About 30 per cent of its assets are in Japan. The Nikkei 225 was down by 14 per cent in the third quarter, though, and Polar has suffered accordingly. The shares, approaching 480p in June, were unchanged at 372p as the company revealed some nasty losses in funds under management.
In the six months to the end of September, the first half of Polar’s financial year, these fell from $12.3 billion to $10.9 billion, split about half and half between market movements and clients taking out money. There were signs that the main Japan fund was suffering a slower rate of decline and, indeed, net inflows of funds actually began again in September.
Since the end of the first half, the Japanese market has improved again. Most of Polar’s performance fees crystallise in the second half of the year. The main point in holding the shares has been the strong dividend yield, approaching 7 per cent. However, analysts’ forecasts, including those of Peel Hunt, just appointed joint broker, have this payment uncovered for this year. The dividend looks safe enough, but there is better value elsewhere.
My advice Avoid for now
Why Polar remains exposed to Japanese market
John Laing Group
€45-50m cost of Klettwitz purchase
John Laing shares have been a poor market since the summer, when they topped 230p. Floated at 195p in February, they rose 2p to 191¼p after news of a significant acquisition, of one of the biggest wind farms in Germany, for as much as €50 million.
The company is an odd hydrid. It takes stakes in infrastructure projects before or during the building process, unlike quoted infrastructure funds that prefer to take the completed article and rely on guaranteed income to fund dividends. The Klettwitz wind farm fits into this model because it is being rebuilt, with new turbines fitted.
This approach takes on more risk, because the projects are not completed, but hopefully it provides some upside in value. John Laing has now invested more than £150 million so far this year, more than a third of it on renewable energy.
The model allows returns to shareholders in the form of ordinary dividends and a share of the £100 million or so made each year from disposals, because John Laing does not hang on to the assets after completion but flips them into one of those specialist funds, including a couple that came out of the company and have first right of refusal.
The poor share price performance may be down to the overhang from the impending distribution of the near-63 per cent held by Henderson to the fund manager’s own investors, put in place during the float but now just being completed. The shares yield a respectable 3.9 per cent and look worth holding for that reason alone, given the potential uplift.
My advice Hold for income
Why Mix of dividend yield and capital growth
And finally . . .
NAHL operates the National Accident Helpline and is well known for its adverts on daytime television, putting clients in touch with its team of specialist lawyers. It is now buying Bush and Company Rehabilitation, which offers such services to those who have suffered what are described as “catastrophic” injuries. The cost of the deal is £25 million; NAHL has raised £14.2 million via a placing of new shares at a hefty discount to the current price. The shares’ main attraction is a dividend yield of about 5.5 per cent.
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