When dividend stocks fall, income seekers wake up. That’s because a lower share price means a higher yield, all else being equal. Two high-yielding FTSE 100 income stocks both took a beating in October. So which looks the better buy today?
Aberdeen’s comeback
Aberdeen Group (LSE: ABDN) fell 9.13% last month, derailing its recent recovery. It was finally shaking off the after-effects of the disastrous 2017 merger with Standard Life that was supposed to create an investment-management powerhouse. Instead, the combined group struggled with weak investment performance, customer withdrawals and the loss of major mandates. Outflows reached £32.9bn in 2017 then £40.9bn in 2018. Its flagship funds disappointed and the business spent years restructuring.
There have been signs of progress recently, helped by its purchase of the Interactive Investor platform. October’s weakness also reflects wider anxiety about financial stocks, alongside lingering concerns about the asset manager’s recovery.
Aberdeen’s third-quarter trading update (21 October) showed assets under management and administration up 4% this year to £578.9bn. Interactive Investor attracted £2.5bn of net inflows, up 32%. But its adviser business suffered another £700m of outflows. The shares fell more than 3% on the day.
I already have asset manager exposure through FTSE 100 high-yielders Legal & General and M&G. But I can see the attraction of Aberdeen, given its trailing yield of 6.6%.
Yet the forecast yield is the same for 2026 and 2027. That’s hardly surprising as the total dividend has been frozen at 14.6p per share for the last five years. Aberdeen’s price-to-earnings ratio of 13.3 looks reasonable. Risks include continued customer withdrawals if stock markets struggle, which will also squeeze investment performance and commission-related fees.
I think Aberdeen is worth considering for long-term income seekers who aren’t already overloaded with insurance stocks, as I am. But I don’t like that dividend freeze.
NatWest takes a bigger hit
The other opportunity is NatWest (LSE: NWG), which I do hold. Its shares slumped 15.8% in October, considerably more than Aberdeen.
The trailing yield jumped to 5.6% as a result. That’s lower than Aberdeen’s, but look at this — forecasts suggest a yield of 6.4% in 2026 and 7.01% in 2027. Those are mighty increases and recent experience suggests NatWest may be good for it. The board hiked in its interim dividend 50%.
Friday’s (30 October) third-quarter results landed badly. Profits were broadly in line with expectations, but management merely reaffirmed its full-year targets rather than raising them as hoped. The outlook for net interest income disappointed, with competition squeezing margins. The shares plunged 8.75% on the day.
UK banks have had a tremendous run but the troubled UK economy could hit product demand and drive up bad debts. The sector escaped a major new windfall tax in the Budget, but the threat lingers.
NatWest still made a £2.2bn profit in Q3, and trades on a stupidly cheap forward price-to-earnings ratio of just 7.8. Of the two, I think it offers far better value, and is well worth considering in November. For investors who have enough financial stocks, this FTSE 100 share yielding 7% is also worth considering…
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Harvey Jones owns shares in Legal & General, M&G and NatWest.
