Identifying durable dividend stocks sometimes requires looking at former stock market darlings. One such business is Aberdeen (LSE: ABDN). After years in the wilderness, it’s heading back to the FTSE 100.
The asset manager spent much of the past decade battling outflows, disappointing investors, and watching its shares drift lower. As a result, many wrote it off as a business in long-term decline.
Yet, with the stock doubling in 15 months, it still offers a dividend yield of around 6%. So just how secure is that income stream today?
A dividend under pressure
Aberdeen’s dividend has remained remarkably resilient through a difficult few years. While many investors focus on the recent recovery, it’s easy to forget how challenging conditions have been.
Persistent outflows, declining assets under management and weak investor sentiment all weighed heavily on profitability. As the shares slumped, the dividend yield climbed into double digits, reflecting growing concerns about whether the payout could be maintained.
Management ultimately held its nerve. The annual dividend has remained at 14.6p per share, but it hasn’t increased for years. That caution looks understandable. While adjusted capital generation covered the dividend 1.24 times in FY25, the board has stated that it wants coverage to reach at least 1.5 times before considering an increase.
In other words, the dividend appears well supported today, but investors hoping for a near-term hike may need to be patient.
The growth engine
The biggest reason I feel more comfortable about the company’s dividend today is interactive investor (ii).
For years, the investment case depended heavily on a traditional asset-management business battling industry-wide pressures. Outflows, fee compression, and weak sentiment made it difficult to generate consistent earnings growth, which inevitably raised questions about the long-term sustainability of the payout.
Today, the picture looks very different. ii has become the group’s largest profit contributor, accounting for around 58% of adjusted operating profit. The platform continues to attract customers with its flat-fee model, particularly higher-value investors and SIPP holders looking to avoid percentage-based charging structures.
That momentum remains impressive. Customer numbers recently surpassed 500,000, SIPP accounts rose 30%, and net inflows reached £7.3bn.
More importantly, growth is translating into higher profits. Adjusted operating profit increased 34% last year to £155m, demonstrating the scalability of the platform.
From a dividend perspective, that’s significant. The group is becoming less dependent on the cyclical fortunes of active asset management and increasingly supported by a growing, cash-generative platform business.
In my view, that diversification helps explain why dividend cover has improved despite the ongoing challenges elsewhere in the group.
The next hurdle
The challenge now isn’t maintaining the dividend — it’s growing it.
As long as the Adviser business continues to experience net outflows, it’s difficult to imagine a meaningful increase.
In particular, attracting and retaining independent financial advisers remains crucial. If the company can’t convince advisers to entrust more client assets to its platform and investment products, the path to stronger earnings and a higher dividend becomes far less certain.
Even so, when I look back to early 2025, when the shares were trading at an all-time low, the business has come a long way. I’ve continued buying shares in recent months and, with the dividend looking increasingly secure, I still see Aberdeen as one to consider.
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Andrew Mackie owns shares in Aberdeen.
