Ups and downs

These are not the only factors at play though. If they were, all investment platforms would perform roughly the same, and they don’t. For example, Hargreaves Lansdown (LSE: HL) trades 85% higher than it did five years ago, while Charles Stanley Group (LSE: CAY) has fallen almost 30%.

Last year, I said Charles Stanley was finally showing signs of recovery, and its stock is up 25% in the last four months. Today, it reported full-year results to 31 March and the share price remains unmoved at 320p. That’s despite a 6.5% rise in discretionary funds to £13.1bn, while revenues rose 2.8% to £155.2m, with growth in all divisions.

Out of breath

Its core business posted profit before tax of £11.6m, a rise of 6%, while pre-tax profit margins improved from 8.8% to 9.2%.

However, with reported profit before tax dipping from £11.4 to £11m, investors remain underwhelmed. The group also warned that “given the extent of the equity market rally earlier this year, we anticipate much more modest returns over the remainder of the year.”

It said the long-term prospects remain positive but “equities are likely to pause for breath until evidence of better economic growth emerges.”

Take your time

Charles Stanley has strengthened its balance sheet, boosting its cash position 23.7% to £81.2m, and lifting its regulatory capital solvency ratio from 177% to 214%. Management expects to incur £9.5m in restructuring costs over the next two to three years, which should yield annual savings of more than £4.5m from 2022 onwards.

CEO Paul Abberley said it’s now on track to deliver a medium-term profit margin target of 15%. However, given the downbeat outlook, there’s  a pricey forecast valuation of 18.5 times earnings and okay-but-not-great yield of 3.5%, I’m in no hurry to buy.

Only way is up

Charles Stanley is a £160m minnow compared to £10.5bn FTSE 100 big fish Hargreaves Lansdown. If you’re kicking yourself for not buying Hargreaves Lansdown stock a few months ago, you’re not the only one. It took full-blooded advantage of the year’s surprise stock market recovery to climb almost 40% in a matter of months.

Hargreaves keeps on growing. In the year to 30 April, it won net new business of £2.9bn, attracted 55,000 new clients to lift its total to 1.19bn, and boosted revenues 8% to £395.9m. CEO Chris Hill shrugged off political and macro-economic uncertainty to claim “we are well positioned to deliver attractive growth.”

As you were

City analysts expect Hargreaves Lansdown to post another 4% earnings growth this year, then 10% in the year to 30 June 2020. That will lift the yield to 2.4%, which may appear low, but this is partly due to strong share price growth as management has been progressive. The big concern is it trades at a whopping 36 times earnings, although that’s lower than last year’s 45 times.

The group also enjoys a massive 75.3% return on capital employed. Betting against the Hargreaves Lansdown share price has been a losing play for a decade. The question is, are you are prepared to pay a premium price?

The post I reckon it’s not too late to buy this fast growing FTSE 100 success story appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

Stanley’s road

Wealth manager Charles Stanley Group (LSE: CAY) is up more than 3% after reporting continued revenue growth across all divisions, with core business revenue up 5% to £77.7m.  It also announced a 5% increase in funds under management and administration to £25bn, with discretionary funds up by 7.3% to £13.2bn.

Core business profit before tax rose 5.6% to £5.7m, with profit margins increasing from 8.4% to 9.3%. Charles Stanley also boasted of a “robust balance sheet”, with net assets of £102.8m and cash balances of £67m. It’s also boosted its capital adequacy ratio 177% to 193%, while investors are clearly pleased with the 10% interim dividend increase to 2.75p per share.

Today’s interim results for the six months ended 30 September offer plenty of positives. They also confirm the success of its restructuring progress, after it posted a net loss of of £6.2m in 2015, due to tough competition and lack of volatility.

Up and down

The £152m group now trades at 14.5 times earnings, with a forecast yield of 3.7%. Earnings growth looks healthy too, forecast at 29% for the year to 31 March 2019, then 35% the year after. Charles Stanley expects to make continued progress in the second half of the financial year, although this will partly depend on trading levels which it has less control over. I’ve held this stock before and may be tempted to look at it again.

This hasn’t been such a good day for ground engineering specialists Keller Group (LSE: KLR), which is down 4% after reporting that its outlook for 2019 is “somewhat mixed.” Its trading update said that although its main markets remain healthy and the order book sound, “as previously indicated the contribution from major projects will be lower than this year.”

Going to ground

Last month, Keller’s stock plunged 25% after issuing a profit warning. Its APAC division is on course to make a pre-tax loss of between £12m-£15m in 2018, instead of the small profit expected, due to deteriorating ASEAN market conditions. Following a management review it’s exiting low margin activities in Singapore and Malaysia, with combined revenues of around £60m, to focus on higher-margin sectors where it holds a technological advantage. It hopes this will return its APAC operations to profit in 2019.

Its geotechnical businesses traded in line with expectations in North America, avoiding any material impact from Hurricanes Florence and Michael, although unusually poor weather in Texas in October has adversely affected its Suncoast business, already hit by rising steel prices.

Not my bag

Growth in Keller’s core European, Middle Eastern and North African markets has “continued to be offset by challenging market conditions in Brazil and South Africa, reflecting the geo-political environment in those countries.”

Somewhat mixed is an understatement. Trading at 595p, Keller has lost half its value since peaking at 1,281p in February 2014. You could take a punt on its tempting forecast valuation of 5.8 times earnings and forward yield of 5.8%, with cover of 2.3, but I won’t be joining you.

The post Why I’d buy this recovering dividend stock, but dodge this falling knife appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. 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.

In today’s interim results report, chief executive Paul Abberley tells us that the firm aims “to become the UK’s leading wealth manager by 2020,” a lofty ambition that would crown the company’s status as one of oldest on the London Stock Exchange with origins stretching back as far as 1792.

Good numbers

The numbers look good this morning with core business revenue almost 10% higher than a year ago and profit before tax rising more than 53%. The firm is making progress attracting business and reported funds under management and administration 1.3% higher than last year. But as well as getting business in, Charles Stanley is making more of it and managed to push up its core business operating margin from 6.2% a year ago to 7.3%. The target is to achieve a margin of 15%, which would really ignite profits.

Mr Abberley explains that a focus on core wealth management activities achieved the return to profitability and growth from the top line. Indeed, during the period the disposal of the only remaining non-core activity, EBS Management PLC, was finalised, so the management team will soon be free from the further distraction of non-core activities. In a measure of how well things are going, the directors pushed up the interim dividend by almost 67%.

However, the shares are down around 5% as I write and I reckon the outlook statement might have spooked investors a little. The firm thinks favourable market conditions will persist on a six-to-12-month view but warns that headwinds from major regulatory change look set to drive up IT and process change costs. On top of that, commission income has been lower than the directors expected over recent months and the firm will need a higher level of trading activity or other revenue increases in the second half if it is to meet current market expectations.

A long record of growth

Nevertheless, with the current year dividend yield running around 2.6%, and rising fast, I think Charles Stanley is a tempting recovery and growth proposition that could sit well in a portfolio alongside the likes of Legal & General Group (LSE: LGEN). The FTSE 100 insurance and investment firm has delivered several years of double-digit percentage increases in earnings, although City analysts following it expect that run of increases to break with a 3% decline in earnings during 2018.

So far, investors have shared in Legal & General’s success and the dividend is up almost 100% over the past five years. At today’s share price around 267p, the forward dividend yield for 2018 runs a little over 6% and forward earnings look set to cover the payment just over one-and-a-half times, which looks tempting.

Back in August with the interim report, chief executive Nigel Wilson told us that the business model has “proven to be resilient to political, economic and regulatory uncertainties.”  He thinks structural weaknesses remain in the UK economy but expects the company’s growth to continue.

 Stocks for the longer term

The post Legal & General Group plc isn’t the only big-dividend stock I’d buy right now appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. 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.

Let it go

Charles Stanley is flying even higher after today’s final results, with the share price up 3.94% in early trading. Its current share price is 361p, up nearly 24% year-to-date, delighting wise investors who stayed the course. Today it reported profit before tax of £8.8m, turning around a £300,000 loss in 2016. Full-year reported revenue was exactly the same as the previous year at £141.6m, despite disposal of non-core activities. Its balance sheet has been strengthened, with group cash balance of £58.4m against £48.4m before.

In further good news, funds under management and administration rose 17.1% to £24bn, while core business operating margins more than doubled from 3.1% to 7.1%. The company management is aiming for 15% by 2020. The icing on the cake was a 20% increase in the total 2017 dividend to 6p a share, up from 5p in 2016.

Charles Stanley, I presume

Chief executive Paul Abberley thanked the company’s transformation programme for delivering “increased profitability, more satisfied clients and improved staff engagement”, and said the company is now focusing on improved governance, better cost control and a revised remuneration policy. This should make it more streamlined and focused, boosting profitability.

Charles Stanley’s aim to become the UK’s leading wealth manager by 2020 does sound somewhat ambitious and Brexit is clearly a concern, but with City forecasters predicting 54% earnings per share growth in 2018 and 38% in 2019 the outlook is bright (painfully so, given my recent sale). A forecast valuation of 17.1 times earnings is therefore undemanding, and today’s 1.5% yield is forecast to hit 3.9% in 2019. A stock market meltdown could offer a short-term setback, or conversely, an even more exciting buying opportunity. I should never have sold.

Here we go round again

Fashion house Mulberry Group (LSE: MUL) specialises in timeless British luxury and recent share price performance has been stylish, with the stock up 57% in the last three years. However, it is down 2% this morning after its preliminary results for the year to 31 March disappointed.

There are some handsome numbers in there, with total revenue up 8% to £168.1m, profit before tax up 21% to £7.5m and cash rising from £14m to £21.1m. However, investors were scared away by the slowing sales growth in recent weeks. Although full-year sales rose 8% to £128.3m, with like-for-likes up 5%, over the 10 weeks to 3 June retail like-for-likes (including digital) pipped up just 1%.

Retail fail

Gross margins also dipped slightly from 62% to 61.6%, due to a large number of new designs introduced during the first six months, although management noted that production efficiencies returned to normal levels during the second half of the year

Today’s statement also showcased a 6.6% increase in operating expenses to £96.5m, primarily due to higher retail store costs of £3.7m and increased marketing, advertising and promotion costs of £1.6m. Mulberry’s turnaround clearly has a little further to go.

The post One turnaround stock I would buy today, and one I would avoid appeared first on The Twelfth Magpie.

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Harvey Jones doesn't hold shares in any company mentioned in this article. 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.

Soaring shares

With that in mind, I was pleased to see shares in Charles Stanley Group (LSE: CAY) climbing by 15% this morning, to 307p.

The driver was a set of first-half results that showed a 13% rise in funds under management and administration to £22.5bn, and an 80% hike in reported pre-tax profit to £3.6m. That resulted in a 46% rise in reported earnings per share to 4.44p, with the interim dividend maintained at 1.5p per share.

A new remuneration package for its employed investment managers and self-employed associates was described by chief executive Paul Abberley as “the successful conclusion of the first stage of our turnaround strategy.” And he added that “we are well positioned to pursue the second phase of our strategy, with an emphasis on building the delivery of organic growth.“

Most companies would be happy to leave it at that, but Charles Stanley says its vision is “to become the UK’s leading wealth manager by 2020.” That’s the kind of ambition I like to see in a company.

Forecasts suggest the firm’s recovery should drop the P/E multiple of the shares to around 13 by the year ending March 2018, and that would give us a PEG ratio of a low 0.2 (where 0.7 and under is usually seen as a good growth indicator).

So Charles Stanley is looking good as a growth investment on that score, but on top of that we should be seeing the return of attractive dividends. The annual cash payment was slashed by more than half in 2015 and kept low for 2016, but we should be seeing the start of a comeback in the current year, and analysts are predicting a 4% yield by March 2018.

Reliable stalwart

My thoughts are also drawn to Aberdeen Asset Management (LSE: ADN), which has intrigued me for some time. Aberdeen’s earnings have fallen a little over the past couple of years, and there’s a big EPS drop on the cards for the year just ended in September — results are due on 28 November, and will be eagerly anticipated.

But a share price fall since early 2015 would still leave us with a P/E of 15 on the current 288p share price, and that doesn’t look too stretching to me — especially as a return to EPS growth forecast for 2017 would drop that ratio to around 13.5.

Aberdeen also has hefty dividends forecast, set to yield 6.8%, though that’s likely to be uncovered this year and only barely covered by forecast 2017 earnings — so news of dividends will be a key thing to look out for.

Aberdeen’s third-quarter update revealed a disappointing net funds outflow of £8.9bn, but that was more than covered by £17.5bn in asset appreciation — it seems those who withdrew their money missed out on a good quarter.

Chief executive Martin Gilbert pointed to the “many uncertainties out there, including the shape of the UK’s future relationship with the EU, which might undermine market confidence.” But to me that suggests it’s time to buy into cheap opportunities rather than selling — and I see Aberdeen Asset Management shares as good value now.

The post Why are Charles Stanley Group plc shares soaring today? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.