FTSE 250 stock aberdeen group (LSE: ABDN) has endured a torrid time since its ill-fated 2017 merger between fund managers Standard Life and Aberdeen.
After touching 485p in the giddy aftermath of the tie-up, the shares headed relentlessly south. Today, they trade at just 175p. While dividends have softened the blow, they haven’t come close to offsetting the capital destruction.
Poor fund performance, investor outflows and the widely mocked vowel-free rebrand to aberdeen in 2021 all took their toll.
The aberdeen share price is bouncing back
It hasn’t suffered alone. FTSE 100 financials like Legal & General Group, M&G and Phoenix Group Holdings have also endured years of share price volatility as rising interest rates lured investors towards safer returns from cash and bonds.
Many had written aberdeen off, but suddenly there are signs of life. First, it’s finally ditched the ridiculous name. Well, almost. It now insists on being called ‘aberdeen group’, with a lowercase ‘a’, which is a little irksome.
That was announced alongside full-year results on 4 March, which finally gave investors something positive to chew on. Despite ongoing market volatility, the aberdeen share price is up 12% in the past month and 15% over the last year.
aberdeen swung back into the black in 2024, posting a pre-tax profit of £251m. That’s a nifty turnaround from a £6m loss the year before. Adjusted operating profit edged up 2% to £255m, driven by cost-cutting, better markets and strong growth at acquisition Interactive Investor, a rare bright spot in troubled times. Assets under management rose 3% to £511bn, while net outflows narrowed dramatically, from £17.6bn to £1.1bn.
CEO Jason Windsor was keen to highlight the company’s return to growth, but does that make it a buy?
A cheap stock with a high yield
Jumping on a stock right after a strong set of results is always a risk. Excitement can fade, and profit-takers may drag the price down. That said, aberdeen looks good value trading at a price-to-earnings ratio of just over 11. And it offers an eye-catching dividend yield of 8%+.
Chastened by recent troubles, management will continue to focus on cost discipline and strengthening core businesses, while the name change signals a desire to move on from past missteps.
Challenges remain. Outflows in its asset management division persist, while active fund managers generally are still losing ground to passive investing. With inflation stubbornly high, interest rates could stay elevated, meaning investors can secure decent returns from cash and bonds without risking capital on dividend shares like this one.
Analysts are more positive
Structural pressures on active fund management aren’t going away, and brokers remain wary. Of 15 analysts offering one-year share price forecasts, the median target is just over 166p, about 5% below today’s price.
However, most of those forecasts will predate the latest results. On 6 March, Jefferies upgraded its target to 215p and issued a Buy rating.
As someone who owns Legal & General, M&G and Phoenix, I’m already heavily exposed to this sector. But for those who aren’t, aberdeen could be worth considering. Especially for investors willing to pick their moment and hold for the long term.
This post was originally published on Motley Fool
