Question
I have about 1400 Standard Life shares. I reinvest the the income from these to give me extra shares.
There are no charges for holding these shares,but the price of them does not appear to be moving of late. What should I do with them?Answer
At the time of writing Standard Life shares are trading at around 207p, valuing your holding at around £2,900, which is well below the 230p you paid at flotation back in July 2006.
Since flotation Standard Life has concentrated on long term pension and investment business, selling its banking business to Barclays for £226 million, outsourcing life cover to LV=, offloading some annuity liabilities to a Canadian Insurer and generally cutting costs. It’s also reported to be mulling over the sale of its healthcare insurance division for around £200 million.
As for its focussed strategy Standard Life has made some headway, increasing its presence in the self-invested personal pension (Sipp) market and continuing to build a reasonable reputation for investment management.
So what’s gone wrong?
Well, the credit crunch hurt revenues through a combination of fewer customers investing new money and falling markets reducing the amount that Standard Life earns from managing investments (usually a percentage of investment value).
It also seems that the market believes Standard Life lacks dynamism and is overly reliant on the UK market – which could prove to be as fragile as its economy.
Nevertheless, 2009 results were better than expected, despite doing little for the share price. And the appointment of a new chief executive, David Nish, might inject some fresh air into the business, although I wouldn’t hold your breath.
To put this into perspective, Standard Life’s share price has risen by about 13% over the last year compared to the FTSE 100 at 45%, and fallen by about 11% over the last six months (FTSE 100 +10%). The 2009 dividend payout was worth about 6% of your investment – nice, but not enough to compensate for poor share price performance.
Should you hold or sell? Stockbrokers seem pretty neutral on the stock. If you’re concerned (as some are) that markets are due a fall then selling would seem sensible. Otherwise if markets are flat I think it’s likely you’ll continue to enjoy dividends worth around 6% of your investment, which seems worthwhile when savings rates are so low. If markets continue to race ahead then Standard Life will probably continue to get left behind, unless David Nish can really get the business firing on all cylinders. In practice he’ll probably do an ok job and get paid a disproportionately large bonus...
Hope this helps you make a decision. Personally I’d sell, primarily because I’m nervous about markets, but of course I could turn out to be wrong.
Does anyone else have a view on this? If so, please let us know by posting a comment below.
I have about 1400 Standard Life shares. I reinvest the the income from these to give me extra shares.
There are no charges for holding these shares,but the price of them does not appear to be moving of late. What should I do with them?Answer
At the time of writing Standard Life shares are trading at around 207p, valuing your holding at around £2,900, which is well below the 230p you paid at flotation back in July 2006.
Since flotation Standard Life has concentrated on long term pension and investment business, selling its banking business to Barclays for £226 million, outsourcing life cover to LV=, offloading some annuity liabilities to a Canadian Insurer and generally cutting costs. It’s also reported to be mulling over the sale of its healthcare insurance division for around £200 million.
As for its focussed strategy Standard Life has made some headway, increasing its presence in the self-invested personal pension (Sipp) market and continuing to build a reasonable reputation for investment management.
So what’s gone wrong?
Well, the credit crunch hurt revenues through a combination of fewer customers investing new money and falling markets reducing the amount that Standard Life earns from managing investments (usually a percentage of investment value).
It also seems that the market believes Standard Life lacks dynamism and is overly reliant on the UK market – which could prove to be as fragile as its economy.
Nevertheless, 2009 results were better than expected, despite doing little for the share price. And the appointment of a new chief executive, David Nish, might inject some fresh air into the business, although I wouldn’t hold your breath.
To put this into perspective, Standard Life’s share price has risen by about 13% over the last year compared to the FTSE 100 at 45%, and fallen by about 11% over the last six months (FTSE 100 +10%). The 2009 dividend payout was worth about 6% of your investment – nice, but not enough to compensate for poor share price performance.
Should you hold or sell? Stockbrokers seem pretty neutral on the stock. If you’re concerned (as some are) that markets are due a fall then selling would seem sensible. Otherwise if markets are flat I think it’s likely you’ll continue to enjoy dividends worth around 6% of your investment, which seems worthwhile when savings rates are so low. If markets continue to race ahead then Standard Life will probably continue to get left behind, unless David Nish can really get the business firing on all cylinders. In practice he’ll probably do an ok job and get paid a disproportionately large bonus...
Hope this helps you make a decision. Personally I’d sell, primarily because I’m nervous about markets, but of course I could turn out to be wrong.
Does anyone else have a view on this? If so, please let us know by posting a comment below.
Read this Q and A at http://www.candidmoney.com/questions/question181.aspx
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