When it comes to FTSE 100 dividend shares, I think there are few better candidates for my diversified portfolio than the one I’ll discuss today.
I’m constantly on the lookout for FTSE 100 shares that pay hefty levels of dividend income.
And with interest rates near all-time lows, Standard Life Aberdeen (LSE:SLA) and its 8.3% yield look exceptionally attractive to me.
Live your best life
One of the major points CEOs forget is that people rely on FTSE 100 dividend shares. The income helps to pay our bills in retirement. And it aids those who aren’t there yet to compound their growth in a company shareholding.
So when I heard former chief executive Keith Skeoch say in April that Standard Life had a “moral duty” to stick to its word and pay shareholders? It gladdened my heart, even if it did cost the asset management giant £300m.
The new chap at the top, Stephen Bird, officially took over in July. Bird joined after heading up the global consumer banking division at Citigroup.
In late October he bought 500,000 shares at 217.59p for a total outlay of £1.1m. That’s some statement of intent. With the FTSE 100 dividend shares now around the 260p mark Bird has made a tidy profit.
Best FTSE 100 dividend shares?
Standard Life remains one of the few FTSE 100 dividend shares to keep its dividend in place in 2020.
In Skeoch’s last set of results before stepping down, Standard Life held its interim dividend at the 7.3p per share level. That’s even while pre-tax profits dipped 30% to £195m for the six months to 30 June 2020. And fee-based revenue fell 13%.
Investors had turned to lower-risk assets, which meant smaller fees for the asset manager, it said.
At an assumed 21.6p per share dividend, based on today’s prices, we’re looking at a yield of 8.3%. That’s good for holders. But is it sustainable? The pressure is on Stephen Bird to strengthen the Standard Life balance sheet. One of the ways the City thinks he might do this is to cut the dividend.
But news of the first wave of Covid-19 vaccines has injected some much needed optimism into the FTSE 100. So more investors could feel comfortable seeking better gains at slightly higher risk. I see the medium-term outlook for Standard Life’s fee revenue as stronger than it was.
What the future could hold
JP Morgan analysts said in a broker note in September that Standard Life could seek extra growth through acquisitions. The investment bank suggested Bird could invest surplus cash from June’s £207m sale of a stake in India-listed HDFC Life. Perhaps to buy up other assets in the Asia Pacific region. That seems like a sensible move to me. Certainly if it helps boost earnings back to previous heights.
The company has said it will also complete on its £400m share buyback programme in the second half of 2020. So I see the Standard Life share price growing into 2021 as fewer shares are available on the open market.
There are uncertainties ahead with these FTSE 100 dividend shares, I’m not going to lie. But even if Stephen Bird bows to pressure and halves the dividend to more like 4.1%?
With the share buyback plan ongoing I would still consider adding Standard Life to my portfolio. It’s going on my watchlist.