Stock prices across the U.S. asset management industry have declined over the past year, as the industry struggles to adapt to changing trends. For example, Invesco Ltd. (IVZ) stock has declined 25% in the past 12 months.
Invesco’s falling share price has elevated its dividend yield to nearly 6%. The dividend payout appears secure, which means Invesco is one of the best high dividend stocks for 2019.
The good news for Invesco shareholders is that the company is taking the necessary steps to change along with the broader industry. While investors wait for the turnaround, Invesco is one of the most attractive high-yield dividend stocks in the financial sector.
D-I-Y Meets Personal Finance
Individual investors are taking control of their own finances like never before, made possible by falling brokerage fees and low-cost exchange traded funds (ETFs). This has come at a direct cost to professional asset managers, particularly when it comes to actively managed funds.
Invesco is not immune to these industry forces. In 2018, Invesco’s assets under management, or AUM, fell 5.3% from the previous year. In all, total AUM saw long-term net outflows of $39 billion in 2018, $37.2 billion of which was comprised of actively-managed assets.
The good news is, Invesco has responded by investing in a number of different growth areas. Since the beginning of 2018, Invesco has embarked on multiple acquisitions to expand its reach. First, Invesco acquired the ETF business from Guggenheim Investments for $1.2 billion. Then, Invesco acquired OppenheimerFunds for approximately $5.5 billion, comprised of $4 billion in preferred shares and 81.9 million Invesco shares. Lastly, Invesco acquired Intelliflo, a leading technology platform for financial advisors that supports approximately 30% of financial advisors in the U.K.
These separate deals boosted Invesco’s presence in ETFs and financial technology, two of the biggest growth segments in the asset management industry. These acquisitions will help Invesco better serve its clients. Investors widely demand lower fees and commissions, and new technology. Invesco’s acquisitions will allow the company to more effectively respond to changing trends.
Tremendous Value And Income Opportunity
Despite Invesco’s steep share price decline over the past year, the company’s fundamentals have held up fairly well. Invesco generated adjusted earnings per share of $2.43 in 2018. While this was a 10% decline from the year before, Invesco’s EPS easily covers its annual dividend payout of $1.24 per share. Invesco had a dividend payout ratio just above 50% for the year, which indicates a sustainable dividend.
In addition, Invesco stock trades for a forward P/E ratio of 9.1, based on expected EPS of $2.34 for 2019. This is a low stock valuation for a company that remains highly profitable, with a positive future growth outlook. Invesco could reasonably see a higher P/E ratio of 11-12, which would result in a significantly higher share price.
Expansion of the P/E ratio, along with future earnings growth and the nearly 6% dividend yield, could generate total returns well above 10% per year over the next five years. Invesco has a high dividend yield and a sustainable payout, which makes it an attractive stock for value and income.
Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.
© 2021 Newsmax Finance. All rights reserved.