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Like many traders, I benefit from the passive income streams I can earn from proudly owning dividend shares. One FTSE 250 share I used to personal has had a tricky 12 months, with its share worth falling over a fifth in simply 12 months. That has pushed its dividend yield as much as 10.8%.
A yield of virtually 11% definitely grabs my consideration. However, as many traders have realized the onerous manner, no dividend is ever assured.
So may this be a cut price to snap up for my portfolio – or a worth entice which may but fall additional?
Unconvincing dividend report
The share in query is the daftly named abrdn (LSE: ABDN).
Whereas previous efficiency shouldn’t be essentially a sign of what to anticipate in future, abrdn’s dividend historical past does instantly set an alarm bell ringing in my head.
The dividend has been held flat since 2020. That 12 months noticed a minimize of round one third within the annual dividend per share. Previous to that, the peculiar dividend per share had been held flat for one 12 months however earlier than that it had been rising yearly for a couple of years.
Earlier than entering into the small print of the enterprise, that sample alone makes this sound probably like a scenario the place an organization has been unrealistic about its long-term dividend capability, tried to keep away from a minimize by holding it regular, after which confronted the inevitable by lopping an enormous chunk off the payout.
Dividend potential – but in addition some clear dangers
Is that what has occurred at abrdn? To some extent, I believe sure — and it could truly underplay the continuing challenges the FTSE 250 agency might face in sustaining its payout.
Final 12 months, the dividend of 14.6p per share was not coated by diluted earnings of 0.1p per share. The 12 months earlier than had seen a much bigger hole, with the identical dividend per share however a diluted loss per share of 26.6p.
In the meantime, final 12 months noticed internet money inflows from working actions double, to £221m. However that dividend was costing the corporate £267m, considerably greater than its working revenue. That raises a pink flag for me concerning the sustainability of the payout.
abrdn continues to battle dangers equivalent to traders pulling out more cash than they put in. In its most up-to-date quarter, institutional and retail wealth belongings below administration and administration shrunk barely.
Set in opposition to that, the corporate’s interactive investor division reported greater belongings below administration and administration, in addition to a internet influx of shopper funds. By constructing its digital footprint, abrdn is hoping to get on a progress trajectory as soon as extra. If that may assist it generate extra cash, the dividend might find yourself being safer than it presently appears.
I’m not prepared to purchase
Nonetheless, that is still to be seen. abrdn has a variety of work nonetheless to do and the outlook for investor demand within the subsequent a number of years is unclear.
With rising dwelling prices and a weak financial system, I see a danger of outflows from the kinds of funds provided by abrdn.
So whereas the high yield is attention-grabbing, for now I can’t be including this FTSE 250 share to my ISA.
