After climbing 50% in 6 months, are abrdn shares a buy for 2023?

With full year results as of March 1, abrdn (LSE: ABDN) shares have been climbing faster than the FTSE 100. Since its 52-week low in October 2022, it has risen more than 50%.

Some may think they missed the boat and now it’s too late to buy to recover. But I think looking at the long-term view shows a different picture.

Despite the gains, abrdn shares are still down 15% over the past 12 months. And we saw a five-year decline of 50%. Several potential recoveries after the pandemic crash have also failed.

So what is abrdn stock to buy now? I see one problem trying to answer that question, and I’m talking about the value. For 2023, the broker has shares at a price-to-earnings (P/E) of 23 times. That is ahead of the long-term FTSE 100 average of around 14-15. And this is a problematic sector, not a happy sector.

Evaluation

Looking to 2024, the P/E could drop to 20 if the analysts are right. But that still seems like a heady price. Savings grace is a dividend yield, forecast at 7% for the next few years. Cover by earnings, though, is very possible.

I can’t help but feel that abrdn can be a turning point. The company was formed by the merger of Aberdeen Asset Management and Standard Life, two companies that had previously been very confident.

But the combined company saw cash out, worsened by Lloyds‘ decision to transfer funds elsewhere. However, Lloyds’ cash has now run out, ending in 2022.

Refocus

The company has refocused its business in the new year. At the time of H1 results, chief executive Stephen Bird said: “When I became CEO at the end of 2020, I said that we will pursue a diversification strategy by refocusing our Investment business into strong areas, where we have scale and tend towards global growth trends and also expand our reach to the UK higher. wealth market.“

He thought it would go according to plan, adding: “The strength of our balance sheet means we can continue to invest and reward our shareholders.“

The company completed its share buyback program in December 2022. And it maintained its interim dividend at 7.3p per share. Taken together, that increases my confidence in abrd’s ability to meet dividend expectations.

Refusal point

And that’s where I think the turning point might be. If there is a need to cut the dividend in the future, I can see investors leaving the stock again.

But if abrdn can return to paying progressive dividends, ideally above long-term inflation, I can see market sentiment turning positive. In the meantime, dividends are expected to remain constant. And that P/E valuation seems a bit high. So I think we could be looking at a few more years of uncertainty, and possibly more stock price volatility.

But on balance, I’m bullish on abrdn. I think it could be a good buy for long-term financial sector investors.