As an old-school fundamental value and income investor, I’m always on the lookout for unloved, unwanted and undervalued stocks. And for what it’s worth, I think there’s plenty of deep value hidden in the UK’s elite FTSE 100 index and the FTSE 250 right now.
Ideally, what I’m looking for are so-called ‘fallen angels’ — otherwise sound companies with temporarily depressed prospects and share prices. But tracking these down is far from easy, because it’s rarely obvious which companies are stumbling for a while and which are in permanent decline.
Booted from the Footsie?
One ailing company stock that has caught my eye recently is abrdn (LSE: ABDN), formerly Standard Life Aberdeen. Based in Edinburgh, Scotland, this global asset manager is currently a member of the FTSE 100 index — but perhaps not for long.
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Indeed, the business was relegated from the FTSE 100 to the FTSE 250 index a year ago in August 2022. However, it returned to the blue-chip index last December. Alas, history appears ready to repeat itself towards the end of this month (on 30 August, to be precise).
As I write, the abrdn share price stands at 160.9p, which values this financial firm at £3.1bn. It’s down 33% in only five weeks. To avoid being demoted, its market value needs to be closer to £4bn, which will be quite a stretch. Hence, should the group be ejected from the FTSE 100, some fund managers will have to sell its shares. That could even possibly include a few of its own portfolio managers — how ironic, huh?
I like the delightful dividend yield
abrdn manages around £496bn of assets for a range of individual and institutional investors. But in its interim results released on 8 August, the group reported larger-than-expected fund outflows of £4.4bn in the first half of this calendar year.
What’s more, this soon-to-be-FTSE 250 company also complained of a “challenging macro environment” that’s hurting investor sentiment. Nevertheless, it held its interim dividend at 7.3p and plans to match last year’s total cash payout of 14.6p a share.
Hence, at the current share price of 160.9p, the stock offers an ongoing dividend yield of 9.1% a year. This bumper cash yield has been pushed up by the shares collapsing by almost a third (-32.5%) since their 52-week high of 238p on 20 July — just over five weeks ago.
Thanks to both bond and stock prices plunging last year, abrdn had a tough 2022. But I think its cash payouts are safe — for now, at least. If I had more spare cash at hand, I’d gladly snap up this steal of a stock today. Meanwhile I’ve added this beaten-down FTSE 250 contender to my list of cheap, high-yielding shares that I might buy in the future.
