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The FTSE 250 is full of undervalued gems, and insurer and wealth manager aberdeen (LSE: ABDN) might just be one of them. After a rough few years, its share price has jumped 12% in a month. Yet despite the recent rally, it still offers a blistering dividend yield of more than 10%.
Aberdeen has famously taken a battering since the £11bn merger of Standard Life and Aberdeen Asset Management in 2017. The deal was supposed to create a powerhouse in fund management, instead it created an engine of wealth destruction.
Can aberdeen shares fully recover?
Around 100 overlapping funds were culled, while Lloyds yanked £25bn of its mandate and the vowel-crushing 2021 rebrand to ‘abrdn’ became a meme for all the wrong reasons.
I love a good recovery play and as the market-cap slipped below £3bn in August 2024 I declared the sell-off overdone. It’s since slumped below £2.5bn.
The challenges weren’t unique to aberdeen. FTSE 100 financial asset managers M&G, Legal & General and Schroders have also been caught up in wider market volatility.
UK dividend shares fell out of favour as investors obsessed over skyrocketing US tech. Even their sky-high yields couldn’t save them, with cash and bonds offering 5% a year, with minimal capital risk.
In January, I noted encouraging numbers, with aberdeen’s assets under management and administration both rising, along with net inflows in its long-suffering Investments division. Full-year results on 4 March brought more positive news, and not just the welcome decision to dump the widely mocked Abrdn label in favour of aberdeen.
The group swung to pre-tax profit of £251m in 2024, from a loss of £6m the year before. Operating profit rose 2% to £255m, helped by tighter cost control, steadier markets and a strong contribution from platform Interactive Investor.
Assets under management climbed again while total group outflows slowed sharply to £1.1bn, a big improvement on the £17.6bn exodus in 2023. There’s still work to do but this looked like a big step in the right direction.
CEO Jason Windsor promised better results in both 2025 and 2026, with a sharper focus and streamlined leadership. But that was before Donald Trump’s tariff war, which has changed everything.
High income and a low valuation
The aberdeen share price is down 20% over the last month, and that’s despite bouncing back 12% last week. Over the past 12 months, it’s up just 1.9%.
Still, the valuation looks compelling, with a price-to-earnings (P/E) ratio of just 9.2. The trailing yield is a bumper 10.5% and while that isn’t guaranteed, management’s keen to maintain shareholder payouts. Loyal investors deserve to be rewarded.
The 15 analysts offering 12-month forecasts give a median target of just over 161p. If they’re right, that’s a 17% increase from today’s price. Forecasts are guesswork at the best of times. Today, they’re weirdly meaningless, although I was surprised to see that only three of 18 analysts rate the stock a Strong Buy, while eight call it a Strong Sell.
That feels harsh to me. I think aberdeen’s worth considering for investors seeking a generous income stream with some share price recovery potential over the longer run.
However, I said that two years ago and while the income has come through, the growth hasn’t. Further patience is required.
