When I last wrote about the abrdn (LSE: ABDN) share price on 20 December, I was pretty scathing about the FTSE 250 investment manager. It’s been a textbook case of value destruction ever since its ill-fated 2017 merger.
What a difference a month makes. Abrdn’s shares are suddenly back from the dead, after climbing 10% in January. So is this the beginning of a long-awaited recovery, or just another false dawn?
Let’s not get carried away. The stock is still down 9% over one year and nearly 50% over five years. But the last month does suggest investors are seeing reasons to be cheerful again.
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FTSE financials are fighting back
I’ve noted a resurgence in interest for UK financial stocks, as investors anticipate falling inflation and interest rates. My personal plays on the sector, FTSE 100 asset managers Legal & General Group and M&G, both climbed 6% in January.
abrdn’s revival isn’t just due to a sector shift. Investors also reacted to positive Q4 results, released on 15 January. Finally, there were some genuinely encouraging signs.
Assets under management and administration rose 3% in 2024 to £511bn, helped by a 1% gain in Q4.
Most notably, the group’s Investments division, long a source of painful outflows, posted a net £500m inflow in the final quarter.
Institutional & Retail Wealth returned to a net inflow of £300m for the year, a huge improvement from the eye-watering £17.9bn net outflow in 2023.
Interactive Investor, the star performer in abrdn’s portfolio, continues to shine. Customer numbers grew 8% to 439,000 in 2024. Net inflows nearly doubled year on year to £5.7bn, proving its worth as a smart acquisition.
Abrdn still has a battle on its hands. Its adviser platform remains on the rack, with £3.9bn of outflows last year. Equity outflows remain a concern, particularly in Asia and emerging markets, where conditions remain challenging.
A stunning rate of income
Last but not least, there’s the dividend. At 9.4%, it’s one of the most attractive yields on the FTSE 250. abrdn has frozen its payout at 14.6p per share for four years. Shareholders payouts are covered just once by earnings, maybe less.
I’m sure the board will be desperate not to cut it, especially as things look to be picking up. But it can’t be ruled out. The board insists its cost transformation programme will provide a “solid base from which to grow”.
I’m hoping for a string of interest rate cuts in 2025. If we get them, that could breathe fresh life into financial stocks. The Bank of England is expected to cut base rates to 4.75% on Thursday 6 February. Thereafter, it’s anybody’s guess. But abrdn’s sky-high yield will look even more attractive if returns on cash and bonds do fall.
UK equities might regain favour after DeepSeek’s AI breakthrough rattled US tech giants, prompting investors to take a second look at the FTSE dividend payers.
Things are looking up but we’ve been here before with abrdn. Personally, I’ll stick with Legal & General and M&G. But I’m intrigued to see how abrdn fares. There’s life in it yet.
