Up 12% in a month but this FTSE 250 bargain still yields more than 10%!
The FTSE 250 is full of undervalued gems, and insurer and wealth manager aberdeen (LSE: ABDN) might just be one of them. After a rough few years, its share price has jumped 12% in a month. Yet despite the recent rally, it still offers a blistering dividend yield of more than 10%.
Aberdeen has famously taken a battering since the £11bn merger of Standard Life and Aberdeen Asset Management in 2017. The deal was supposed to create a powerhouse in fund management, instead it created an engine of wealth destruction.
Can aberdeen shares fully recover?
Around 100 overlapping funds were culled, while Lloyds yanked £25bn of its mandate and the vowel-crushing 2021 rebrand to âabrdnâ became a meme for all the wrong reasons.
I love a good recovery play and as the market-cap slipped below £3bn in August 2024 I declared the sell-off overdone. It’s since slumped below £2.5bn.
The challenges werenât unique to aberdeen. FTSE 100 financial asset managers M&G, Legal & General and Schroders have also been caught up in wider market volatility.
UK dividend shares fell out of favour as investors obsessed over skyrocketing US tech. Even their sky-high yields couldn’t save them, with cash and bonds offering 5% a year, with minimal capital risk.
In January, I noted encouraging numbers, with aberdeen’s assets under management and administration both rising, along with net inflows in its long-suffering Investments division. Full-year results on 4 March brought more positive news, and not just the welcome decision to dump the widely mocked Abrdn label in favour of aberdeen.
The group swung to pre-tax profit of £251m in 2024, from a loss of £6m the year before. Operating profit rose 2% to £255m, helped by tighter cost control, steadier markets and a strong contribution from platform Interactive Investor.
Assets under management climbed again while total group outflows slowed sharply to £1.1bn, a big improvement on the £17.6bn exodus in 2023. Thereâs still work to do but this looked like a big step in the right direction.
CEO Jason Windsor promised better results in both 2025 and 2026, with a sharper focus and streamlined leadership. But that was before Donald Trumpâs tariff war, which has changed everything.
High income and a low valuation
The aberdeen share price is down 20% over the last month, and thatâs despite bouncing back 12% last week. Over the past 12 months, it’s up just 1.9%.
Still, the valuation looks compelling, with a price-to-earnings (P/E) ratio of just 9.2. The trailing yield is a bumper 10.5% and while that isn’t guaranteed, managementâs keen to maintain shareholder payouts. Loyal investors deserve to be rewarded.
The 15 analysts offering 12-month forecasts give a median target of just over 161p. If theyâre right, thatâs a 17% increase from todayâs price. Forecasts are guesswork at the best of times. Today, they’re weirdly meaningless, although I was surprised to see that only three of 18 analysts rate the stock a Strong Buy, while eight call it a Strong Sell.
That feels harsh to me. I think aberdeenâs worth considering for investors seeking a generous income stream with some share price recovery potential over the longer run.
However, I said that two years ago and while the income has come through, the growth hasn’t. Further patience is required.
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More reading
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- Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was âmost shorted in UKâ
- This FTSE 250 share offers a juicy 9.8% yield. Will it last?
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Harvey Jones has positions in Legal & General Group Plc and M&g Plc. The Motley Fool UK has recommended M&g Plc and Schroders Plc. 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.
