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The nation’s greatest dividend payers, by dint of their dimension, are FTSE 100 corporations. However that doesn’t imply that FTSE 250 corporations don’t spend a good bit of money on paying dividends to shareholders.
Some FTSE 250 shares have enticing dividend yields. For instance, one which has a well known and well-established enterprise at present yields 9.5%.
Investing £1,000 in the present day and compounding it at 9.5% yearly for a decade, it might have already got grown to £2,478.
That kind of (potential) dividend gold mine is tempting for me – however is that this the precise share for me to purchase to try to obtain it?
Giant, confirmed enterprise
The FTSE 250 firm is monetary service agency abrdn (LSE: ABDN).
Its model could have a daft spelling, however it’s well-established and well-known. The agency additionally owns digital platform ii (abrdn doesn’t like mixing vowels and consonants, it appears). So this can be a large enterprise with a big buyer base and deep monetary markets expertise.
How large?
It ended final 12 months with over half a trillion kilos of belongings beneath administration and administration.
That was increased than the extent on the finish of September. I see that as encouraging, as buyers pulling more cash out than they put in has typically been a problem for abrdn in recent times. I believe it continues to be a danger.
Nonetheless, whereas its business efficiency has lengthy been inconsistent, abrdn is what I might regard as a confirmed enterprise. It made a revenue of £171m within the first half of final 12 months.
Dividend is tempting, however will it final?
However abrdn faces a variety of challenges, from robust competitors to the potential that its cost-cutting programme will sap workers morale.
The dividend is enticing. However it has been held regular since 2020, when it was reduce by a 3rd. Previous efficiency will not be essentially a information to what is going to occur in future. In any case, even when the dividend stays on the similar stage, the present yield could be enticing to me.
My concern is the chance for one more reduce sooner or later. The agency made simply £12m in its most up-to-date full-year outcomes. That follows a lack of over half a billion pound the prior 12 months.
To maintain its dividend, abrdn must throw off sufficient spare money to pay for it. Its earnings efficiency over the previous a number of years doesn’t fill me with confidence it’ll do this with sufficient regularity for me to sleep comfortably as an investor.
Clearly, the corporate is making an attempt to reshape itself.
It has been chopping prices, whereas utilizing its digital platforms to try to attraction to a wider vary of potential shoppers than its conventional buyer base. That technique might work, wherein case earnings could develop.
However the enterprise has lengthy been an unpredictable performer. A number of the causes for that lie exterior its management. For instance, a weak economic system might result in buyers placing much less cash into the markets, hurting funding managers’ earnings.
The dangers right here don’t sit comfortably with me, so for now I can’t be shopping for abrdn shares.
