Is abrdn’s eye-catching 9.2% dividend yield sustainable?

Shares in investment manager abrdn currently yield 9.2%. Generally speaking, says Rupert Hargreaves, it pays to be sceptical of very high dividend yields. So is that the case here, or is abrdn one for income investors to tuck away?

Abrdn office in Edinburgh
Abrdn has been focusing on growing its wealth management business
(Image credit: © Iain Masterton / Alamy)

Abrdn plc (LSE: ABDN) currently offers one of the highest dividend yields in the FTSE 100. The company, formerly known as Standard Life Aberdeen plc, yields 8.4% based on Refinitiv analyst estimates.

It pays to be sceptical of high dividend yields and in this case, there’s clear evidence that this might not be sustainable. The company’s dividend cover – the ratio of earnings per share divided by the dividend payout – stands at 0.7 on a forward basis suggesting the firm is paying out more than it can afford – a clear red flag for income investors.

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Rupert Hargreaves
Contributor and former deputy digital editor of MoneyWeek

Rupert is the former deputy digital editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.

Rupert has written for many UK and international publications including the Motley Fool, Gurufocus and ValueWalk, aimed at a range of readers; from the first timers to experienced high-net-worth individuals. Rupert has also founded and managed several businesses, including the New York-based hedge fund newsletter, Hidden Value Stocks. He has written over 20 ebooks and appeared as an expert commentator on the BBC World Service.