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FTSE 250 investment manager Aberdeen’s (LSE: ABDN) current dividend yield is 7.1%. This is derived from its 2024 dividend of 14.6p and its present share price of £2.06.
As such, it is a cornerstone of my dividend income portfolio. This has been designed to deliver a high dividend income that I can use in retirement to have more fun than the State Pension might allow.
Of course, dividend yields change as a stock’s price and/or its annual dividend payout alters.
So, what is the outlook for Aberdeen’s?
History repeating?
They do say that past performance is no guide to future returns, which is true. But it can provide some useful context.
In Aberdeen’s case, the firm has paid the same 14.6p dividend every year since 2020. This has historically been split into two payments of 7.3p.
The firm has already announced its first interim dividend this year, of 7.3p. And the consensus view of analysts is that it will again pay a total of 14.6p this year.
Moreover, they predict that it will pay the same amount in 2026 and 2027 too.
So, based on the same average share price as now, the dividend yield would remain at 7.1%.
Very nice, in my view. Why? Because firstly, it is much more than the FTSE 250 and FTSE 100 averages (3.5% and 3.1%, respectively).
And secondly, it is much more than the 4.4% current ‘risk-free rate’ (10-year Gilt yield) as well. This effectively means that I am being well compensated for taking the extra risk involved in investing in shares.
Does the business look solid?
Aberdeen has been reorganising itself since it was demoted from the FTSE 100 in 2023. This has centred on cost reduction (mainly through reducing middle management) and improving the product offering.
So far, this looks to have gone very well. By the end of 2023, it had already exceeded its initial £75m cost-cutting target in its Investments division. The overall £150m objective is expected to be achieved by the end of this year.
Meanwhile, its Interactive Investor business saw record net inflows and 25% profit growth in H1 2025. Its Adviser business has also seen net inflows improve, although profitability dipped recently due to repricing. This was done to improve its competitiveness in a crowded market.
A risk here is that such increased competition to reduce its margins further.
However, Aberdeen’s full-year 2024 results, released on 4 March this year, saw an IFRS profit of £251m. Last year, it was a £6m loss. Its Q3 trading update showed assets under management rose 6% to £542.4bn.
The firm also reiterated its 2026 targets of £300m+ adjusted operating profit, and around £300m in net capital generation.
Big dividend income gains
Given the current 7.1% dividend yield and ‘dividend compounding’, another £5,000 invested would make me £5,149 in dividends after 10 years.
After 30 years on the same basis, this would rise to £36,811.
Adding in the initial £5,000 investment and the total value of the holding would be £41,811.
This would pay me an annual dividend income of £2,969 by that stage! But of course, this is not guaranteed.
Given this, and the fundamental soundness of the business as I see it, I will buy more of the stock shortly.
Other high-yield shares have also caught my eye in recent days.