Standard Life - Location, Location, Location

Standard Life: They recently announced the unexpected disposal of their Canadian businesses for £2.2bn (a price to book value of 1.9x), with £1.75bn to be returned to shareholders (chunky when measured against a market cap of £9.9bn). This equates to 73p per share (the shares trade at 415p) and will be offered as a capital or income payment. As an income payment it is a yield of 17.6%. The analysts seem unperturbed that these businesses are being sold with most feeling that they were not as attractive as Standard Life’s core operations. Alongside the earlier acquisition of Ignis this all seems designed to lock into a key asset management role in the UK, focused on lines producing better cash generation as opposed to old style life assurance derived products. The board intends to maintain the ‘progressive dividend policy of growth’ on a per share basis. Following the share consolidation there will be fewer shares, so the overall dividend cost for Standard Life will decrease. So you can elect to receive your 73p as income, but it is a one off. For income investors you are looking to long term dividend flows and growth. This disposal does not impair dividend levels per share or dividend growth, indeed a slightly slower growing part of the group has been hacked off. So if you were happy to hold Standard Life before, you should be just as happy now. Just now though, the increased concerns over Scottish independence are clouding prospects for Scotland based companies. Standard Life has stated that it has contingency plans in place and the speculation is that they would flee south to England. This would involve one off costs, but should not negate the investment story.  (Neil Cumming, 10th September 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk