As an old-school fundamental value and income investor, I’m always on the lookout for unloved, unwanted and undervalued stocks. And for what it’s worth, I think there’s plenty of deep value hidden in the UK’s elite FTSE 100 index and the FTSE 250 right now.
Ideally, what I’m looking for are so-called ‘fallen angels’ — otherwise sound companies with temporarily depressed prospects and share prices. But tracking these down is far from easy, because it’s rarely obvious which companies are stumbling for a while and which are in permanent decline.
Booted from the Footsie?
One ailing company stock that has caught my eye recently is abrdn (LSE: ABDN), formerly Standard Life Aberdeen. Based in Edinburgh, Scotland, this global asset manager is currently a member of the FTSE 100 index — but perhaps not for long.
Indeed, the business was relegated from the FTSE 100 to the FTSE 250 index a year ago in August 2022. However, it returned to the blue-chip index last December. Alas, history appears ready to repeat itself towards the end of this month (on 30 August, to be precise).
As I write, the abrdn share price stands at 160.9p, which values this financial firm at £3.1bn. It’s down 33% in only five weeks. To avoid being demoted, its market value needs to be closer to £4bn, which will be quite a stretch. Hence, should the group be ejected from the FTSE 100, some fund managers will have to sell its shares. That could even possibly include a few of its own portfolio managers — how ironic, huh?
I like the delightful dividend yield
abrdn manages around £496bn of assets for a range of individual and institutional investors. But in its interim results released on 8 August, the group reported larger-than-expected fund outflows of £4.4bn in the first half of this calendar year.
What’s more, this soon-to-be-FTSE 250 company also complained of a “challenging macro environment” that’s hurting investor sentiment. Nevertheless, it held its interim dividend at 7.3p and plans to match last year’s total cash payout of 14.6p a share.
Hence, at the current share price of 160.9p, the stock offers an ongoing dividend yield of 9.1% a year. This bumper cash yield has been pushed up by the shares collapsing by almost a third (-32.5%) since their 52-week high of 238p on 20 July — just over five weeks ago.
Thanks to both bond and stock prices plunging last year, abrdn had a tough 2022. But I think its cash payouts are safe — for now, at least. If I had more spare cash at hand, I’d gladly snap up this steal of a stock today. Meanwhile I’ve added this beaten-down FTSE 250 contender to my list of cheap, high-yielding shares that I might buy in the future.
The post After crashing 33%, this FTSE 250 candidate looks a steal appeared first on The Motley Fool UK.
Cliff D’Arcy has an economic interest in Abrdn shares. 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.
Motley Fool UK 2023