The FTSE 250 funding supervisor previously often called abrdn has not solely added a couple of extra vowels to its title lately. The newly-renamed aberdeen group (LSE: ABDN) has additionally turned a 2023 £6m IFRS loss earlier than tax right into a 2024 £251m revenue.

In accordance with the 4 March outcomes, this included an adjusted working revenue of £255m towards final yr’s £249m. It additionally integrated a £92m achieve on the sale of its European personal fairness enterprise and a 34% drop in restructuring bills to £100m.

This restructuring focuses on reducing prices (primarily in center administration) and bettering product choices for shoppers.

I believe the important thing threat right here is that this restructuring falters in some unspecified time in the future for some purpose. That mentioned, the agency now targets growing revenue by 18% inside two years.

A passive revenue machine

I purchased shares within the agency after its demotion from the FTSE 100 in September 2023. This mechanically triggered heavy promoting from tracker funds and people solely capable of put money into top-tier shares.

As a share’s yield strikes in the other way to its price, this meant an enormous rise in its dividend return. Taking a look at its dividend historical past and financials, I believed it extremely doubtless that aberdeen would preserve paying 14.6p a yr.

In any case, it had carried out so yearly since 2020, together with throughout one other stint within the FTSE 250 in 2022. And analysts forecast it might proceed to pay 14.6p in annual dividends from 2024-2027.

It did exactly that this yr, which supplies a yield on the present £1.74 share price of 8.4%. By comparability, the common FTSE 250 yield is 3.4% and the FTSE 100’s is 3.5%.

So, traders contemplating a £10,000 holding within the agency would make £13,096 after 10 years if the yield averaged the identical. After 30 years on the identical foundation, this may rise to £113,200.

The whole worth of the aberdeen stake could be £123,200 by then. This may generate £10,349 a yr in annual passive revenue by that time!

You will need to observe that these returns are additionally based mostly on the dividends being reinvested again into the inventory. It is a customary funding observe often called ‘dividend compounding’.

May there be a share price bonus too?

I by no means anticipated to make a lot cash rapidly on a rising aberdeen share price in addition to on the dividends. However this has occurred and there’s far more room for appreciation in my opinion.

The agency’s 0.6 price-to-book ratio could be very undervalued in comparison with its opponents’ common of two.2. These comprise RIT Capital Companions at 0.7, M&G at 1.4, Bridgepoint Group at 2.7, and Authorized & Normal at 4.1.

aberdeen group’s 13.2 price-to-earnings ratio can be very undervalued towards its 41.5 friends’ common. And the identical applies to its 2.3 price-to-sales ratio in comparison with the 3l.8 common of its opponents.

The discounted money movement analysis I ran to determine the inventory’s truthful worth exhibits it’s at present 48% undervalued. Due to this fact, its truthful worth is £3.35, though market vagaries may push it decrease or larger.

As I have already got a big place in aberdeen from a a lot decrease price, I’ll stick to that. Nevertheless, if I didn’t have this, I might purchase the inventory as rapidly as doable for its huge yield and main share price potential.