Jupiter Fund Management - Pin the tail on the special dividend...?

Jupiter Fund Management: Despite being very successful, this group seems to have struggled to get an ‘exciting’ tag from the stock market. Perhaps its fund range is perceived as a tad ‘vanilla’, but over the years managers such as Edward Bonham Carter, Philip Gibbs, Tony Nutt and John Chatfield-Roberts have all provided gravitas and success to the organisation. This dull image is possibly a little unfair, given that many rivals would love to have Jupiter’s pedigree, within a UK savings market place experiencing structural long term growth. The first quarter update, to 31^st March 2015, shows AUM up a healthy £2,866m to £34,761m (+9%). Of this rise, almost £2bn was market movement and £872m was net flows, with Mutual funds up £883m, whilst Segregated (-£32m) and Investment Trusts (£21m) almost netted each other out. Jupiter has at times been pitied for its unfashionable European Fund exposure, but the all action Mario Draghi has come to the rescue. As Euro QE kicks in, Jupiter has seen its funds pulling the punters in. So the outlook statement sounds quite perky, envisaging fund growth at ‘attractive margins’ backed by a healthy balance sheet. Shareholders can expect ‘to continue to share the rewards of this growth’, which sound good for future dividends and capital returns.

The P&L is having to adjust to last year’s sale of the private client business, but forecasts for 2015 eps look to be around 28p, which might be a bit cautious after this statement. Anyway, at 440p (flirting with all-time highs) that is a PE of 15.7x. With little capital requirements, the payout ratio is high with last year’s dividend totalling 24.7p, although 11.5p of this was a special. Within that special dividend, 4.9p was from the sale of the private client business. The group flags that this year and going forward running costs will increase by £5m p.a. due to their office move. So, let’s say that the ordinary dividend might move on 5% to about 13.9p. The special dividend line loses that 4.9p, but perhaps the office move costs can be absorbed, so the special might be 6.6p, making a total of 20.5p. That all makes for a near 4.7% yield, although other analysts seem to be pitching for a nearly maintained special element of 11.5p, taking the yield towards 5.8%. Taking the more cautious line, you are still looking at a PE of 15.7x and that 4.7% yield, which are attractive enough for a steady grower in a market that seems hell bent on having a good time. (Neil Cumming^, 15^th April 2015)

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 or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower