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Is Invesco's 6.1% Dividend Yield Sustainable?

Dec. 08, 2018 11:15 AM ETInvesco Ltd. (IVZ)58 Comments


  • Invesco share price started to slide in January and has lost approximately 40% since.
  • This pushes the dividend yield to 6.1%.
  • Despite a bad Q3, the dividend appears to be sustainable.
  • The acquisition of OppenheimerFunds should provide an earnings and cash flow boost, thanks to the substantial synergy advantages.
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I am surprised to see Invesco Ltd. (NYSE:IVZ) is currently trading at around $20, as despite the company’s generous dividend policy, the share price has now lost more than 30% since my previous article just over 3 years ago. The share price fell from $32.50 at the time of publishing the previous article to just $20.60 now. Even after taking the option premium I received on writing a put option for April 2016 into consideration, I’m sitting on a substantial loss.

ChartIVZ data by YCharts

Fortunately, Invesco is paying a generous dividend ($1.20 per year), and this does soften the blow somewhat. But how sustainable is the 6.1% dividend yield? Let’s find out.

The share price is still weak, as Q3 didn't meet expectations

Invesco’s Q3 results were somewhat disappointing, as the total revenue increased by just 0.3%, which is a much lower growth rate than in the first half of the year. It’s also interesting to see the lower investment management fees (-2%), while the service and distribution fee revenue increased by almost 14%. On top of that, the total revenue from performance fees nosedived (-81%), so I’m not too impressed with the company’s revenue in Q3.

(Source: SEC filings)

To make things even worse, its operating expenses did increase by approximately 4%, and this resulted in a 10% lower operating income. Again, a very disappointing performance considering Invesco’s total operating income increased by 13% in the first half of this year. The only thing that allowed Invesco to post a higher net income and EPS was the much lower tax bill. The company had to pay just $61 million in corporate taxes, compared to $123 million in the same quarter last year. This resulted in an attributable net income of almost $270 million, or $0.65 per share. A decent result, but definitely not impressive, and the lower corporate tax rate is the only reason why

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This article was written by

The Investment Doctor profile picture
We zoom in on capital gains and dividend income in European small-caps
As I'm a long-term investor, I'll highlight some stockpicks which will have a 5-7 year investment horizon. As I strongly believe a portfolio should consist of a mixture of dividend-paying stocks and growth stocks, my articles will reflect my thoughts on this mixture.

Analyst’s Disclosure: I am/we are long IVZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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