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The aberdeen (LSE: ABDN) share price has been through hell, but now it seems to be coming back. It’s up 30% in the last month and 22% over 12 months. And I’ll say it, I saw this recovery coming, but didn’t buy.
My hands were tied. I’d already got outsize exposure to the recovering financials sector via FTSE 100 rivals Legal & General Group, M&G and Phoenix Group Holdings. For the sake of diversification, I had to hold back.
So does aberdeen’s rally have further to go?
FTSE 250 recovery play
This FTSE 250 asset manager was created by the botched 2017 merger between Standard Life and aberdeen Asset Management. The loss of a £25bn mandate from Lloyds hurt, and the vowel-stripping rebrand to abrdn was mocked from all sides. The share price collapse wasn’t so funny.
But aberdeen may have turned a corner. The group swung back to profit in 2024, posting pre-tax earnings of £251m on 4 March, against a £6m loss the year before. Adjusted operating profit edged up to £255m, the first rise in three years. Group outflows fell from £17.6bn in 2023 to just £1.1bn.
Q1 results on 30 April saw a disappointing £6.4bn of net outflows, largely to a flagged £4.2bn redemption of a low-margin mandate. However, its acquisiton of platform Interactive Investor continues to deliver the goods, while April’s acquisition of Jarvis Management’s direct-to-consumer book should add another £1bn of assets and up to 30,000 new customers.
Show me the income
aberdeen’s dividend yield hit double digits last year, but that was mostly due to its struggling share price. In 2020, the board cut payouts by almost a third, from 21.6p to 14.6p per share, and they’ve been frozen there ever since. Today’s trailing yield’s still a bumper 7.75%.
There’s no dividend growth expected. The forecast yield for both 2025 and 2026 is 7.65%. By contrast, my three FTSE 100 income stocks are all eyeing small increases of 2%. However, those who reinvested aberdeen’s dividends when the share price was down will now be sitting on a growing pile of shares, rising in value. That’s the long game.
Goldman Sachs upgraded aberdeen to Buy on 2 June, saying investors have focused too heavily on the struggling Investments division. They see progress in other areas being overlooked. Yet risks remain.
Equity outflows remain elevated. The Adviser platform isn’t yet back to net inflows. A lot rests on hitting ambitious 2026 targets, which include both operating profit and capital generation above £300m and at least £150m in cost savings. Any miss will be punished.
Analyst forecasts reflect the challenges. The 14 who’ve issued one-year price targets have a median of just 169p, which is 10.5% below today’s 189p. Even with a 7.65% yield, that would deliver a negative total return of 2.85%, cutting £10,000 to £9,715. But these are only forecasts, and they’re often wrong. Given aberdeen’s progress, I think they’re a bit gloomy.
I’m not adding aberdeen to my portfolio. I still don’t have room for another high-yield financials recovery play. I think the stock’s still worth considering for those who do, but with a long-term view.
