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Three Reasons to Buy Shares in abrdn

Companies / Corporate News Apr 27, 2023 - 09:05 PM GMT

By: Sumeet_Manhas


abrdn, the UK’s largest active asset manager, could be on the cusp of rewarding investors with substantial growth. The FTSE 100 firm’s share price has risen by 40% since October 2022, after a planned return of capital to investors helped reinstate the company’s market capitalisation to approximately $4 billion.

abrdn’s stock offers a 7.5% dividend yield, and many expect the yield to maintain or better this market-beating ratio. As such, the Edinburgh-based company is an attractive prospect to investors for the coming year.

Here are three reasons to buy shares in abrdn in 2023.

A Turnaround in Fortunes for abrdn

The 2017 merger between Standard Life and Aberdeen Asset Management that formed Standard Life Aberdeen didn’t land investors the results they had hoped for. Other active investment management firms have also recently experienced performance and outflow challenges in light of concerns over their ability to compete with cheaper, passive options.

However, things have been looking up for Standard Life Aberdeen following its 2021 rebrand, which transformed the company into abrdn: Since joining the global company in 2020, CEO Stephen Bird has overseen turnaround plans that include streamlining fund management operations, laying out a clear programme for capital returns, and investing in wealth management.

Bird’s three-year strategy to halt revenue decline and create long-term growth has reassured investors and put the company back on track: In 2021, the company’s revenues grew for the first time in five years.

A Lower Dividend Yield Could Bring Rich Rewards

If abrdn’s fortunes continue to improve, its shares are likely to perform well too. Based on the current payout, a 25% increase in share price could bring the asset manager’s current 7.5% dividend yield down to 6%, in line with competitors Jupiter and Liontrust.

Generally, strong dividend yields lie between 2% and 4%. However, dividend yields above 4% can also be a great buy as long as other important stock features (such as share price, price-to-earnings ratio and earnings per share) look healthy.

While abrdn’s lower dividend yield isn’t guaranteed, the asset manager’s upward trajectory means rising shares look likely over the next 12-18 months.

Affordable Stock Despite Falling Markets

Falling asset management markets in 2022 meant a decrease in asset values. In addition to cash withdrawal from investors, this decrease in asset values led to a drop in fee income. While experts predict that 2023 may not prove much easier for asset management stocks, abrdn is an increasingly affordable stock option.

abrdn’s half-year results declared investments worth £1.7 billion in FTSE 100 life insurance firm Phoenix Group and HDFC, one of India’s leading housing finance groups. On top of this, abrdn management revealed surplus capital of £0.6 billion.

Taking abrdn’s current market capitalisation of £3.8 billion and subtracting the investment and surplus capital figures suggests the company’s remaining fund business and wealth management platform (which includes direct investing service interactive investor) have a valuation of £1.4 billion.

Although abrdn generates an operating profit of around £300 million and administers £508 billion of assets for clients, investment experts have called the stock “cheap.” This could be great news for investors looking to buy into the asset management market in 2023, despite the dip in the popularity of asset management stocks last year.

A Good Investment Opportunity

Many signs point to abrdn representing a good investment opportunity this year. As it stands, the company offers an appealing 7.5% dividend yield and various attractive investment assets.

If abrdn’s targeted fund management and wealth operations remain on track and the company delivers its predicted return to growth, buying shares in abrdn in 2023 could prove a wise move for investors.

About abrdn

abrdn is a UK-based global investment company that helps clients plan, save, and invest for their futures. Originating in Edinburgh nearly 200 years ago as a life assurance company, today, abrdn has over £500 billion of assets under administration.

abrdn’s Three Core Vectors

The asset manager works with clients across three core vectors — Personal, Adviser, and Investments — and provides individual, intermediary, and institutional services to UK clients seeking investment and financial planning support.

  1. Personal (£66 billion in assets) — abrdn’s Personal vector helps UK clients save and invest with quality financial planning, digital investing tools, and other key services.
  2. Adviser (£68 billion in assets) — abrdn’s powerful adviser platform assists UK wealth managers and financial advisers in generating growth for their clients and businesses. The company’s adviser platform is the first in the UK to receive and maintain an “A” rating from AKG Financial Analytics.
  3. Investments (£386 billion in assets) — abrdn’s clients enjoy strong investment solutions and benefit from the company’s extensive research, knowledge of local markets, and worldwide expertise. With 22 carefully crafted investment portfolios and an international network of 800 investment professionals, abrdn offers flexible investment trusts to help clients broaden their financial horizons.

abrdn’s Recent Acquisitions to Deliver Client-Led Growth

abrdn recently acquired interactive investor, the UK’s leading subscription-based direct investment platform. Now, alongside its existing wealth and financial planning services, abrdn’s Personal vector clients can feel further empowered to secure their financial futures thanks to interactive investor’s high-tech capabilities.

Finimize, a financial app providing daily investment insights to users, has also joined abrdn. Finimize seeks to make investing accessible and digestible, and its daily newsletter has over one million subscribers and approximately 40,000 premium subscribers. abrdn hopes to support Finimize in becoming the number one information platform for modern investors.

Learn more about abrdn.

By Sumeet Manhas

© 2023 Copyright Sumeet Manhas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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