Jupiter Fund Management - an attractive yield

Jupiter Fund Management (JUP.L): Today’s respectable third quarter update, to 30^th September 2015, shows AUM down 2.4% QoQ at £33,525m. The drop is a negative market movement of £884m, offset by inflows of £77m. Within that £77m, Segregated Mandates lost £142m, whilst (higher margin) Mutual Funds brought in £196m and Investment Trusts brought in £23m. Since the end of last year AUM have climbed £1,630m, from £31,895m to that £33,525m, with net inflows totaling £1,447m and market movements £183m. They comment that in the third quarter the European equity strategies and the Dynamic Bond fund proved popular, with the drop in Segregated Funds being in part top-slicing by clients after good performance. Back at the Interims, Jupiter posted EBITDA up 13.8% at £86.8m, with underlying eps up 15.5% at 14.9p. The dividend was up 8.1% at 4.0p, with net cash at £209.7m. The cash was down from £251m at 31^st December 2014, reflecting seasonal dividend payments and annual staff bonuses. They laid out their dividend policy as follows: “our intention is for the ordinary dividend payout ratio to be around 50% across the cycle. The board then expects to retain up to 10% of pre-variable compensation earnings for investment and growth…The remaining balance….will be returned to shareholders.” For now, capital returns will be as special dividends in line with shareholders overall preferences.

It is often commented that Jupiter is not the sexiest fund management house, but they have a good roster of managers, solid fund performance, a good brand name and a strong balance sheet. This year’s numbers will have to absorb some double running costs of around £4m as they re-locate their London HQ, with an ongoing extra £5m added to the cost base. The group is on course to meet expectations and consensus eps for FY2015 are 28.5p, for a PE of 15.0x at 428p. That implies an ordinary dividend of 14.25p. Last year’s special dividend of 11.5p included 4.9p from the sale of the private client business. Consensus dividend forecasts of 24.25p this year imply therefore a special of 10p this year, down from 11.5p, but still handy. That 24.25p would be a handsome yield of 5.7%, whilst a maintained special would make 25.75p, reaching a 6.0% yield. Consensus forecasts for 2016 (partly reflecting the increased operating costs) are for low to mid single digit growth in eps and total dividends. None of this may make you leap off the sofa, especially given the direct exposure to nervy stock markets, but I still reckon that the stock is a good tuck away when there is dividend growth pressure in big sectors such as resource stocks, banks and pharmas. (Neil Cumming^, 12^th October 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