Down 6% from March, this high-yield star looks cheap to me

High-yield star abrdn must keep shareholders happy with good payouts. But it also has sound growth plans and trading 6% off its high, looks cheap to me.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Concept of two young professional men looking at a screen in a technological data centre

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Last August, high-yield stock abrdn (LSE: ABDN) suffered the indignity of being dropped from the FTSE 100. This followed a fall in the company’s share price of around 40% in the year.  

Created with Highcharts 11.4.3aberdeen group PriceZoom1M3M6MYTD1Y5Y10YALL3 Jan 202219 Jul 2023Zoom ▾Apr '22Jul '22Oct '22Jan '23Apr '23Jul '23Jul '22Jul '22Jan '23Jan '23Jul '23Jul '23www.fool.co.uk

Crucial to its quick return (in December) to the leading index was its policy of ensuring excellent shareholder returns.

Despite its temporary exile, it maintained share buybacks and high dividends in 2022. It said it would pay a full-year dividend of 14.6p per share, the same as in 2021.

Should you invest £1,000 in Sainsbury's right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Sainsbury's made the list?

See the 6 stocks

This gave a final yearly dividend yield of 7.7%. It also restated the ongoing annual dividend target of 14.6p.

The company has no desire to be ejected from the FTSE 100 again. To avoid any chance of this it needs to keep its share price up, and it knows that keeping dividends high is one way of supporting the stock.

For me, this is a great basis for considering buying a company. However, there are others too in abrdn’s case.

Cutting non-core operations

A key reasonwhy its stock price fell so dramatically in 2022 was an outflow of funds under management. From a peak of around £700bn in assets under management, it now manages and administers about £500bn.

This fed through into 2022 results that were already being adversely affected by difficult trading conditions.

The investment company made a pre-tax loss of £651m for 2022, having made a £1.1bn profit a year earlier. Its adjusted operating profit also fell, by 19% to £263m.

From this position, it cut some of its non-core businesses. Last year, it closed its Emerging Markets Local Currency Bond Fund. In February, it sold its discretionary fund management arm to Liechtenstein-based private bank LGT for £140m.

Strengthening its core business

Around the same time, it boosted its core business offering, buying interactive investor last March. The acquisition of the UK’s leading subscription-based direct investment platform bolsters its presence in the UK savings and wealth markets. Indeed, interactive investor’s net revenue increased 38% to £176m last year, with profits doubling to £94m.

In a similar vein, abrdn launched an investment platform with Virgin Money in early April. Customers will be able to invest through this in a Stocks and Shares ISA or a non-ISA investment account.

Broadening its sectoral presence further, abrdn announced on 21 June plans to acquire the healthcare funds of Tekla Capital Management. The deal includes four NYSE-listed healthcare and biotech thematic closed-end funds, totalling £2.6bn in assets under management.

US healthcare expenditure per capita has grown at a compound annual rate of 6% since the 1980s. And over the long term, healthcare has consistently outperformed broad debt and equity indices, according to investment industry data.

There are risks to the share price, of course. There could be further major market shocks this year that would test abrdn’s trading abilities again. There may also be setbacks in executing its new development strategy.

I already have holdings in this sector, but if I did not then I would buy abrdn shares today. One reason would be the high dividend payouts, which I expect to continue. I also think the shares can recoup their losses and rise further as its new business lines develop.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Simon Watkins 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.

More on Investing Articles

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Market jitters caused one of my FTSE 100 stocks to tank!

On Wednesday afternoon, a forlorn Chancellor prompted a sell-off of certain FTSE 100 stocks and led to a rise in…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

£5,000 invested in Greggs shares 1 month ago is now worth…

Greggs shares have sure been in the doldrums over recent months. But is this a FTSE 250 stock to consider…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

An 8.4% yield and down 33%, is Taylor Wimpey’s share price seriously cheap now?

Taylor Wimpey’s share price has fallen a long way as uncertainty plagues the housing market. However, things may be taking…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Dr Martens was one of the top-performing UK shares in June. Time to buy?

Mark Hartley analyses whether Dr Martens’ sharp share price rebound makes it one of the UK shares worth considering right…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Achieving a £1k a month passive income goal with just £20k in savings? It’s possible!

Mark Hartley outlines a simple yet lucrative passive income strategy involving dividend shares and starting with a £20k initial investment.

Read more »

Yellow number one sitting on blue background
Investing Articles

This is the most shorted FTSE stock!

Some investors appear to be speculating on the Yellow Cake share price. Our writer considers why they're targeting this little-known…

Read more »

A close up side view of a father and his young daughter who is a wheelchair user having a cute affectionate moment with each other whilst on a family day out in a beautiful public park in Newcastle upon Tyne in the North East of England.
Investing Articles

Prediction: in 12 months the barnstorming Lloyds share price could turn £10,000 into…

Harvey Jones has done well from the booming Lloyds share price over the last couple of years but can the…

Read more »

Transparent umbrella under heavy rain against water drops splash background.
Investing Articles

3 huge lessons I’ve learnt from the stock market in 2025

Mark Hartley reveals three vital lessons that the stock market has taught him so far this year and a trust…

Read more »