FTSE 250 stock JTC PLC (LSE:JTC) fell 6% in early morning trading on Tuesday. The fall came after a trading update from the Jersey-headquartered fund manager. The firm’s share price had steadily increased during the pandemic but fell in the first months of the year.
JTC provides fund, corporate, and private wealth services to institutional and private clients around the world. The company offers fund services in a range of asset classes, including real estate, private equity, renewables, hedge, debt, and alternative asset classes.
What triggered today’s fall?
Tuesday’s fall came after JTC increased its dividend and said it was upbeat about its outlook. The asset manager reported a 24% increase in underlying annual profit in 2021. Underlying pre-tax profit rose to £24.9m in the year to the end of December from £20.1m a year earlier.
The firm had been acquiring asset managers and made seven purchases in 2021. It said that growth excluding acquisitions was 9.6%. JTC added that it had made a positive start to 2022 and expected further growth and operational improvements. It also said there were a number of acquisitions on track to be completed, while there were more in the pipeline.
It also announced a 13.6% increase to its dividend, the increase taking the payment to 7.67p. The figure means the dividend yield is around 1%, which isn’t a great return, especially considering soaring inflation rates — the highest seen in decades. Prior to this, I could have expected around a 0.88% dividend yield at current prices.
The stock also had its “buy” rating restated by analysts at Berenberg in a report issued on Tuesday. Shore Capital followed Berenberg in restating its “buy” rating as well.
Is this stock right for my portfolio?
I don’t think JTC looks overly cheap right now and I think some investors would have hoped for a bigger increase in its dividend payments, perhaps driving the share price fall. I know this group is growing, but a lot of its value is in continued and future growth. The stock is valued at around £1.1bn but underlying profits only reached £24.9m last year.
I also think there are better value stocks in the sector. Instead I would look at companies such as Bristol-based investment manager Hargreaves Lansdown. Hargreaves, despite a recent fall, still has positive fundamentals and is a market leader with its investment platform. Its price-to-earnings ratio is around 15, considerably less than JTC.
Despite my pessimism, JTC has previously been praised by Shore Capital for having a “high degree of revenue visibility and disciplined approach to M&A”. Shore also noted that earnings per share momentum has been relatively resilient and expected it to continue.
But I’m not buying. The main reason I’m steering clear of this one is because I’m favouring higher-dividend stocks right now. There are a number of reasons for this, the first is that dividend payments can help my portfolio negate inflationary pressure. Higher interest rates and inflation have pushed me to favour security of dividend in the near term over long-term growth potential.
