K2 Asset Management Holdings Ltd: A 9.9% dividend yield hard to beat


Boutique fund manager K2 Asset Management Holdings Ltd (ASX: KAM) has reported a 9.3% increase in revenues to $45.6 million and a 14.85% increase in net profit after tax to $18.9 million for the 2015 financial year.

Fund managers in a sweet spot

These are impressive results and continue the solid trend set by peer Magellan Financial Group Ltd (ASX: MFG) earlier this week and most likely by other listed fund managers including Platinum Asset Management Limited (ASX: PTM) when they report later this month.

Shareholders will be particularly pleased with the performance of the five funds offered by K2. All five funds outperformed their respective indices over the 12 months to June and importantly all five funds have also significantly outperformed since their respective inceptions.

While the impressive outperformance numbers are of course commendable this is also likely to be the cause of concern for some shareholders – the company is heavily skewed towards and reliant upon generating performance fees.

The other concern is the lack of growth in funds under management (FUM) achieved with K2 describing the FUM as having “remained consistent throughout the year finishing at $852.2 million”. Shareholders would no doubt have hoped that the strong outperformance generated would have attracted significant fund inflows.

Dividends even sweeter

A final dividend of 4.5 cents per share (cps) has been declared with the stock set to trade ex-dividend on 17 August and the payment due 26 August. Adding the interim dividend of 4 cps to the final dividend implies that the stock is yielding a very attractive 9.9% fully franked.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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