When Aberdeen renamed itself to abrdn (LSE: ABDN) four years ago, mockery ensued. And the share price has had a poor time since then. The five-letter name apparently represented a “modern, agile, digitally enabled brand.”
Now, in a move that will surely gladden the hearts of vowel-loving investors everywhere, it’s goodbye abrdn and welcome aberdeen group. I still don’t know what they’ve got against capital letters.
It’s apparently all about removing distractions. And the share price got off to an immediate distraction-free start with a 12% morning spike on 2024 results released Tuesday (4 March).
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First profit growth in three years
CEO Jason Windsor opened the results announcement with: “The group grew profit in 2024 for the first time in three years, with each business increasing its contribution.”
Adjusted operating income dipped a bit, by 6%. But it fed through to a 2% rise in adjusted operating profit with net capital generation up 34%. Assets under management rose 3% to reach £511bn. Positive investment inflow seems especially good to me in the current climate of investor fear.
Down at the bottom line, adjusted earnings per share (EPS) grew 8% to 15p. But what about the thing we’ve all been waiting for, dividend news?
The CEO said: “We are able to maintain the historic dividend per share from materially higher, and sustainable capital generation.” That’s 14.6p per share again, for a 9% dividend yield on the previous day’s close. In my mind it must surely be the biggest contributor to the share price jump.
FTSE 250 passive income
Some of the top FTSE 250 forecast dividend yields are stunning right now, some well over 10%. Amazingly, aberdeen’s 9% doesn’t even make the top 10. But these results have just propelled it higher up my list of possible buys for passive income.
The biggest risk I saw was a lack of earnings cover for the dividend. The potential to pay dividends is a bit more complex than that for this kind of investment company. But falling profits coupled with declining assets under management can lead to dividend cuts.
The company was formed from the merger of Standard Life and Aberdeen Asset Management in 2017. And it was almost immediately hit by Lloyds Banking Group walking away. Lloyds withdrew £109bn of assets, seeing the new abrdn as a competitor for its own insurance products.
It’s taken a while to turn things round. But now it looks like it’s happening, my fears of a dividend cut have receeded, though not completely.
Some convincing to do
I still think aberdeen has some way to go to fully reverse the negative sentiment of the past few years. This latest share price spike is welcome. But the shares are still down 45% since the high point of 2021.
And we’re definitely not yet into the clear in terms of economic strength and new days of booming investment. But I think it could turn out to be a good time to consider aberdeen shares for long-term passive income.
