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Magellan (ASX: MFG) HY22 result: big dividend announced

The Magellan Financial Group Limited (ASX: MFG) share price has popped more than 18% today following its half-year results which included a dividend that exceeded the market’s expectations.

To view the results, click here to read my colleague Lachlan Burr-Jensen’s article: Magellan share price (ASX: MFG) explodes 15% on HY22 report.

Source: Rask Media MFG 1-year share price chart

Shareholder incentives

Today’s announcement confirmed it will continue with a 1 for 8 bonus issue of options for its shareholders.

Over the next five years, each option held allows the holder to buy one Magellan share for $35. If the market price doesn’t reach $35 over this time, they expire worthless at no cost to the holder.

But assuming all options are exercised, this would raise upwards of $800 million in new equity, not including the 10 million unlisted options which will be issued to staff.

While the business will receive a nice cash injection, there will be a dilutive effect on its shareholders.

Is it enough?

Magellan and its shareholders are in a tough spot. The company’s CEO resigned in December and its flagship global equities fund has gone through a significant period of under-performance. Soon after, Magellan lost its largest client and went on to suffer another $5.5 billion in outflows since the start of this year.

The bonus issue of options seems to have been made to give investors some much-needed optimism, but this should be weighed against the effects of dilution as its share count increases.

If clients pull out their funds, this can cause others to follow suit. At the moment, there’s a lot of uncertainty around the short-term future for Magellan. I’m going to sit on the sidelines for now.

If you’re looking for some ASX share ideas, check out this article: 3 ASX shares I’m looking to buy this month.

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
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