Tempted by the Standard Life share price? Here are 2 things you should know

first_imgTempted by the Standard Life share price? Here are 2 things you should know Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! “This Stock Could Be Like Buying Amazon in 1997” Roland Head | Saturday, 18th July, 2020 | More on: SLA I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img Our 6 ‘Best Buys Now’ Shares Image source: Getty Images. With interest rates hitting new lows, the idea of earning an 8% income from a respectable name like Standard Life Aberdeen (LSE: SLA) is pretty tempting. But having considered the stock for my portfolio, I’ve decided that the Standard Life Aberdeen share price is probably low for a reason: I’m not sure that the dividend is sustainable.Although I can see some appeal in this stock, I think there are a couple of things you should know before you decide whether to buy SLA shares.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Why I think the dividend might be cutWhen Standard Life and Aberdeen Asset Management merged in August 2017, the plan was that Standard Life would sell its insurance business. The two companies would then form a super-sized fund manager, with attractive economies of scale.The insurance sale worked out quite well. In exchange for its life insurance business, Standard Life Aberdeen received a £2.3bn cash payment and a 20% shareholding in specialist insurer Phoenix Group.Management also released a further stream of cash by gradually selling the group’s stake in Indian life asset manager HDFC. This cash has supported some generous dividend payments and share buybacks. But ultimately these sales are one-off gains.To measure how sustainable the dividend is going forward, I prefer to look at profits from continuing operations. According to the company’s figures, this measure of adjusted pre-tax profit has fallen from £1,039m in 2017 to just £584m in 2019.That’s only just enough to cover Standard Life Aberdeen’s dividend, which cost about £490m last year.New boss could cut payoutThe company’s profits aren’t the only thing that’s been falling. Standard Life Aberdeen’s share price has halved since the merger. Unsurprisingly, new chairman Sir Douglas Flint has decided that a change of chief executive is needed.Former banker Stephen Bird joined SLA on 1 July and will take over fully after a handover period. I suspect that one decision he might take early on is to cut the dividend to a level that’s covered by underlying earnings — something that’s not true at the moment.If that happens, I could see Standard Life Aberdeen’s dividend yield falling from 8% to between 4% and 6%. Not bad, but a big reduction.The Standard Life share price could stay lowAt the start I mentioned two reasons to avoid Standard Life Aberdeen shares. The risk of a dividend cut is one reason. The second is simply that I don’t know how much value this business has to offer.Mr Bird’s job will be to find a way to generate growth from SLA’s main asset management business. But this is a tough sector where profit margins are generally falling due to competition from cheap passive funds.The investment performance of SLA’s funds has not been outstanding in recent years. Finding an edge won’t be easy. Mr Bird has spent a lot of time working in Asia, so this might be one route to growth. But entering new markets is also a tough challenge.Ultimately, I think there’s a risk that this turnaround won’t turn. The Standard Life share price could stay low for several more years before performance improves. Although this should be a good income stock for long-term investors, I’d prefer to put my money in companies with a stronger track record. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Enter Your Email Address See all posts by Roland Headlast_img