It may be tempting when in search of dividends simply to concentrate on the excessive yields within the flagship FTSE 100 index. Notable examples right here embrace Phoenix Group’s 9.4% and the ten.2% at M&G. However the FTSE 250 index additionally accommodates some high-yield shares of observe.

One is asset supervisor aberdeen group (LSE: ABDN), with its 9.8% yield.

The dividend historical past right here isn’t thrilling. Thedividend per share has been held flat for years after the latest lower.

However previous efficiency isn’t essentially a information to what is going to occur in future. If the FTSE 250 agency merely maintains its dividend per share with out growing it, its potential yield is 9.8%. That actually seems engaging to me.

Promising indicators of restoration

I’ve been eyeing aberdeen shares as a possible addition to my portfolio for a while. However I’ve lengthy been involved in regards to the relatively lacklustre, inconsistent enterprise efficiency and what it means for the dividend.

In spite of everything, as long-term aberdeen shareholders know solely too properly, no dividend is assured to final.

However final yr’s efficiency supplied some indicators of a enterprise that could be on the mend. Web consumer fund flows have been nonetheless unfavorable, however a lot smaller than the prior yr. Nonetheless, I see a danger that if traders proceed to withdraw greater than they put in, it might damage aberdeen’s long-term profitability.

Web capital era was up by round a 3rd, which I see as a constructive signal for sustaining the dividend. Diluted earnings per share additionally moved up strongly.

Nonetheless, the purpose about outflows considerations me. It helps clarify why adjusted working internet income confirmed a 6% year-on-year decline.

Not out of the woods but

So, though the outcomes contained some promising indicators of progress, I feel administration has work left to do.

One of many key duties is reversing the web circulation of funds, in order that aberdeen is coping with bigger not smaller quantities of cash general. I see that as useful for earnings over the long term.

If the FTSE 250 enterprise can enhance its internet capital era, that can assist enhance dividend protection. I feel that in flip may be good for the share price, which has fallen 21% over the previous 5 years. That contrasts very badly to a 39% enhance for the FTSE 250 index general throughout that interval.

aberdeen expects to extend internet capital era to round £300m subsequent yr, a rise of roughly 1 / 4 from 2024.

I really feel more and more assured that aberdeen will keep its dividend. Certainly, in its outcomes the corporate’s chief government mentioned that its technique should allow aberdeen “to maintain the historic dividend per share from materially higher, and sustainable capital generation.”

However whereas the enterprise efficiency appears to be shifting in the best path, I would love extra proof that the shift is sustained and sustainable.

So, as a substitute of shopping for now, I’ll proceed to maintain aberdeen on my watchlist. I’ll look to see whether or not it is ready to keep excessive internet capital era and likewise transfer from unfavorable to constructive internet fund flows.