Is Aberdeen Asset Management (LSE: ADN) a good play on recovering emerging markets or a disaster waiting to happen? Well, a 39% share price fall over slightly more than 12 months, to 311p, would tend the suggest the disaster scenario — but a 48% uptick since 11 February and a forecast 6.3% dividend yield for this year lend weight to the recovery option.
Aberdeen focuses its investments on emerging markets with a big chunk going towards Asia. The Chinese slowdown and its effects throughout the region have led to a serious run on investors’ cash, with Aberdeen reporting net capital outflows quarter after quarter — £9.1bn in the three months to December 2015 alone, as the firm said that “flows outlook remains difficult and market volatility continues“.
But Chinese sentiment is improving, and earnings for Aberdeen are expected to bottom out this year. And if the firm can keep that dividend going (albeit not quite covered by forecast 2016 EPS), then that would be a good sign that the future is looking rosier and the shares could be set for a rerating over the next year or so.
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Hotting up
After a couple of years of pre-tax losses, British Gas owner Centrica (LSE: CNA) looks set to swing back to profit this year after cost-cutting and reduced capital expenditure have started delivering results. The firm has had to cut its dividend, from 17p per share in 2013 to 12p last year. But over the longer term Centrica has a progressive policy, and analysts are expecting a return to modest dividend rises which would provide yields of 5.1% and 5.2% this year and next, respectively.
At around 1.25 times, cover wouldn’t be back up to Centrica’s longer-term level, but if the expected bottoming of earnings this year should come off, we should see cover heading back in the right direction from 2017 onward.
Operating cash flow is improving and is forecast to exceed £2bn in 2016, and the company has reduced its net debt to £4.4bn in the first quarter (from a little over £4.7bn at the end of December). I see the long-term portents as good, and now could be a great time to lock in some healthy future dividend growth.
Safe as they come
National Grid (LSE: NG) has been pretty much a byword for dependable progressive dividends, and even with earnings per share having been a little erratic over the past five years, the annual cash handout has been growing bit by bit. At interim time, reported in November, the firm told us it was “well positioned to deliver strong returns and a sustainable, growing dividend“.
A decent 12-month share price rise of 12%, to 970p, has dropped the forecast yield for this year a little, but at 4.5% it’s still significantly better than the FTSE’s long-term average. And if that’s not enough, the attraction of National Grid’s reliable dividends has led to a 66% share price rise in five years, while the FTSE has struggled to keep its head above zero.
Above average dividends plus above average growth — who doesn’t want some of that?
