Is Aberdeen Asset Management plc (ADN) the Ultimate Retirement Share?

Page 1 of 2

LONDON – The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There’s no sign of things improving anytime soon, either, as the eurozone and the U.K. economy look set to muddle through at best for some years to come.

A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.

ABERDEEN ASSET MANAGEMENT INC. LOGOIn this series, I’m tracking down the U.K. large-caps that have the potential to beat the FTSE 100 over the long term and support a lower-risk income-generating retirement fund (you can see the companies I’ve covered so far on this page).

Today, I’m going to take a look at Aberdeen Asset Management plc (LON:ADN), the global investment management group that has client funds worth 193 billion pounds under management.

Aberdeen Asset Management vs. FTSE 100
Let’s start with a look at how Aberdeen Asset Management has performed against the FTSE 100 over the last 10 years:

Total Returns 2008 2009 2010 2011 2012 10-Yr. Trailing Avg.
Aberdeen Asset Management -24.4% 17.2% 56.6% 8.9% 78.6% 26%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 9.4%

Source: Morningstar. (Total return includes both changes to the share price and reinvested dividends. These two ingredients combined are what make it possible for equity portfolios to regularly outperform cash and bonds over the long term.)

You wouldn’t normally expect a FTSE 100 company to deliver a total return of 78.6% in one year, but that’s what Aberdeen Asset Management did in 2012, the year in which it joined the FTSE 100. Last year’s outperformance has given a big lift to the firm’s 10 year average total return, which standards at 26%, compared to 9.4% for the FTSE 100.

However, flash-in-the-pan performances are no use in a retirement share — what we need is consistent returns, year after year. Can Aberdeen Asset Management deliver?

What’s the score?
To help me pinpoint suitable investments, I like to score companies on key financial metrics that highlight the characteristics I look for in a retirement share. Let’s see how Aberdeen Asset Management shapes up:

Item Value
Year founded 1983
Market cap 5.1 billion pounds
Net debt (cash) (2.6 billion pounds)
Dividend Yield 2.7%
5-Year Average Financials
Operating margin 23.1%
Interest cover 23.6x
EPS growth 38%
Dividend growth 15.9%
Dividend cover 1.6x

Here’s how I’ve scored Aberdeen Asset Management on each of these criteria:

Criteria Comment Score
Longevity It’s still a very young business. 2/5
Performance vs. FTSE A 10-year record of outperformance. 5/5
Financial strength Robust and cash rich. 5/5
EPS growth Strong growth in recent years. 5/5
Dividend growth Attractive growth and good cash flow coverage levels. 5/5
Total: 22/25
Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!