Shares in Magellan Financial Group Ltd (ASX: MFG) surged as much as 8% early on Wednesday before retreating to a 5% gain (at the time of writing) after the fund manager delivered a steady interim result and announced a sharply higher dividend.
While statutory profit declined, investors focused on stability in the core business and robust capital management. In a sector still battling fee compression and mixed flows, in addition to Magellan’s company-specific issues, the result was enough to shift sentiment.
50% dividend boost
The standout feature of the result was the dividend.
Magellan declared a fully-franked interim dividend of 39.5 cents per share, up 50% on the prior corresponding period. The payout aligns with the group’s revised policy to distribute at least 80% of operating profit and signals confidence in underlying cash generation.
For income-focused investors, the increase reinforces the company’s commitment to returning capital even as parts of the operating environment remain challenging.
Operating profit after tax held flat at $83.1 million for the half year, while operating earnings per share rose 5% to 48.6 cents, helped by ongoing share buybacks.
Statutory NPAT, however, fell 27% to $68.9 million. The decline was largely due to a $20.5 million negative fair value movement on financial assets, i.e., essentially accounting adjustments for paper losses from changes in the market value of investments Magellan holds.
Encouragingly, strategic partnership income more than doubled to $25.7 million, driven by stronger contributions from Barrenjoey and Vinva. This growing earnings diversification appears to be gaining investor recognition.
Assets under management rose 3% to $39.9 billion, with institutional inflows offsetting continued retail global equity outflows.
Foolish bottom line
Magellan ended the half with $504 million in liquid capital and no debt. The company also returned $38.4 million to shareholders through on-market buybacks during the period.
After a 13% share price decline over the past year, Wednesday’s sharp rally suggests the market may be reassessing whether the worst is priced in. For now, steady profits and a stronger dividend were enough to improve sentiment.
The post Magellan shares surge 5% as dividend boost offsets earnings pressure appeared first on The Motley Fool Australia.
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Motley Fool contributor Kevin Gandiya has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.