IOOF Holdings Limited (ASX: IFL) has reported its FY19 result to investors, is it a buy for the dividend yield?
IOOF Holdings is a diversified financials business that offers a variety of services to clients including financial advice, platform management & administration, investment management and trustee services. IOOF has been operating since 1846 and is now one of the largest financial services industry businesses.
IOOF’s Turbulent FY19 Report
The diversified financials business reported that over the year its total funds under management, administration and advice (FUMA) increased by 18.7% to $149.5 billion.
There was a $1.4 billion net inflow of funds across its platform, $520 million of net inflows through the advice channel and a $16.1 billion increase from the ex Australia and New Zealand Banking Group (ASX: ANZ) Advice Licensees business.
This increase in FUMA drove underlying net profit after tax (UNPAT) higher by 3.4% to $198 million. Meanwhile, UNPAT from continuing operations rose quicker by 5.2% to $184.9 million.
It was a difficult year for financial advice businesses due to all of the issues that were highlighted during the Royal Commission.
IOOF’s statutory net profit plunged 67.7% to $28.6 million as a result of the provision the company made for financial advice remediation totalling $182.7 million including interest and $40.4 million of program costs. IOOF also said it had expensed $12.1 million of product remediation in FY19.
IOOF Management Comments
IOOF CEO Renato Mota said: “As an advice-led business offering choice to clients through open architecture, we believe we are well positioned to take advantage of market opportunities as industry disruption continues, the banks exit the industry and as clients and adviser needs evolve.”
IOOF Dividend
The IOOF Board declared a total full year dividend of 44.5 cents per share. This represents a cut of 18% compared to 2018, but the fall in the share price has meant the dividend yield is 8.5% before franking credits and 12% after counting the franking credits.
Is The IOOF Share Price A Buy?
If IOOF is over the worst of the Royal Commission costs and its profit can stabilise and grow then today’s share price could be an opportunistic time for income hunters, assuming the dividend isn’t cut any more.
With the big banks leaving the advice industry it leaves a lot of space for other businesses to fill in the space like IOOF.
But, there are still plenty of risks and it’s not the type of business I’d add to my own portfolio. I’d much rather buy shares of the reliable businesses in the free report below.
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