I’m targeting £10,399 a year in dividends from £20,000 in this FTSE 250 high-yield star

FTSE 250 investment giant Aberdeen (LSE: ABDN) has paid the same high dividend, generating a very strong yield for the past five years. And analysts forecast it will do the same for at least the next three.

These projections look well supported to me by a reorganisation programme that continues to show real traction.

So, how much dividend income can I make going forward?

Earnings growth momentum

The reorganisation plan followed its demotion from the FTSE 100 in September 2023. It involved delivering at least £150m of cost savings to reshape the group’s core operations.

This included removing around 500 jobs and cutting management layers to boost efficiency and improve the product offering to customers.

A risk to Aberdeen is any failure to continue adhering to these principles going forward. However, by the end of 2023, it had already exceeded its initial £75m cost-cutting target. The remaining £75m in cuts is expected to be announced in its 2025 results to be released on 3 March.

Aberdeen delivered a £251m profit in its 2024 annual results against a £6m loss in 2023. And its H1 2025 results saw profit up 47% year on year to £252m. Net capital generation rose 7% to £111m, and diluted earnings per share soared 48% to 13.5p. Assets under management (AUM) also increased — to £517.6bn — beating analysts’ forecasts of £511.5bn.

In its latest trading update (Q4), AUM increased to £556m. And Aberdeen reiterated its 2026 targets of £300m+ in adjusted operating profit, and net capital generation of around £300m.

How much dividend income?

Aberdeen has paid the same 14.6p dividend every year since 2020. These have generated average annual dividend yields in those respective years of 5.2%, 6.1%, 7.7%, 8.2%, and 10.3%. The variations occur because dividend yields move as share prices (and payouts) alter.

The current dividend yield is 6.8%, based on the same 14.6p dividends and the present £2.16 share price.

Looking ahead, the consensus forecast of analysts is that Aberdeen will pay the same dividend until at least end-2028.

So, my £20,000 holding in the stock would make me £19,402 in dividends after 10 years. This also factors in the dividends being reinvested back into the shares — known as ‘dividend compounding’. It is a similar idea to leaving savings to accrue in a bank account, and it effectively turbocharges dividend returns.

On the same basis (which is not guaranteed, of course), the dividends would increase to £132,929 after 30 years. At that point, the holding would be worth £152,929 (including the original £20,000 investment).

And that could pay me a yearly income from dividends of £10,399.

My investment view

Aberdeen’s appeal to me ultimately rests on the rare combination of a dependable dividend and it building earnings momentum. This is reinforced by a restructuring plan that is already delivering exactly what management said it would.

These are the reasons why I bought the stock in the first place and have added to it since. They are also the reasons why I think the shares are well worth the attention of other investors.

I also have my eye on other high-dividend-yielding stocks in the financial and other sectors.

The post I’m targeting £10,399 a year in dividends from £20,000 in this FTSE 250 high-yield star appeared first on The Motley Fool UK.

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Simon Watkins has positions in aberdeen group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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