Since mid-2019, things have been tough for shareholders of Hargreaves Lansdown (LSE: HL). This stock has been one of the FTSE 100 index’s worst performers in recent years. Could this terrible trend reverse? Also, are Hargreaves Lansdown shares ready to rebound?
This FTSE 100 share slumps
Go back four years and this Footsie stock was doing great. On 17 May 2019, the Hargreaves Lansdown share price closed at 2,419p. Alas, it’s been pretty much downhill ever since.
To show how hard shareholders have been hit, here’s Hargreaves Lansdown shares’ performance over eight timescales (excluding cash dividends):
| One week | -1.0% |
| One month | -5.7% |
| Three months | -9.6% |
| Six months | -11.3% |
| One year | -23.3% |
| Two years | -52.0% |
| Three years | -40.4% |
| Five years | -52.8% |
Over all periods ranging from one week to five years, this Footsie stock has declined. Over two and five years, it has more than halved. Ouch.
On Thursday, this stock closed at 785.2p. This values the investment platform at £3.7bn, making it the fourth-smallest company in the FTSE 100. At this much-reduced valuation, the risk of relegation to the mid-cap FTSE 250 index at the next quarterly reshuffle is rising.
Five facts about Hargreaves Lansdown
1. The group was co-founded by Peter Hargreaves and Stephen Lansdown in July 1981.
2. Based in Bristol, the company is one of the city’s largest employers, with over 2,000 employees.
3. The firm floated in London in May 2007 and has been in the FTSE 100 since 2011.
4. Today, this business administers around £140bn of assets for 1.8m customers.
5. The company’s reputation took suffered after the collapse of Neil Woodford’s equity income fund.
This group grows with financial markets
As the UK’s largest direct-to-consumer investment platform, Hargreaves is there to be shot at. Rivals are winning new customers by undercutting its fees. And zero-commission share-dealing will surely undermine the firm. Hence, future revenue growth might be weaker.
Then again, as we save and invest more for retirement and the future, Hargreaves stands to benefit from this trend. Also, as asset prices rise, so too do the group’s management fees and other revenues.
Furthermore, Hargreaves customers are loyal, with few switching platforms from one year to the next. For example, everyone in my immediate family has HL accounts. In addition, the firm generates a market-beating return on capital, which it can reinvest into future growth.
I like the dividend
In its last financial year, Hargreaves Lansdown paid dividends totalling 39.7p. Based on the current share price of 785.2p, this equates to a tasty dividend yield of 5.1% a year.
What’s more, it has a track record of raising dividends over time. Thus, I expect these payouts to keep climbing. And its strong balance sheet has no debt to weigh it down.
Also, the shares’ forward price-to-earnings ratio of 12.5 equate to an earnings yield of 8%. This covers the dividend almost 1.6 times.
I expect this stock to soar
Despite the negatives, I’ve added Hargreaves Lansdown shares to my buy list. I expect it overcome any hurdles to thrive once more. Indeed, when I next have spare cash, I aim to buy these shares for my family portfolio. And then I hope to see this stock soar in the years ahead!