Platinum Asset Management Limited (ASX: PTM) is a fund manager that specialises in investing in global equities.
Currently, the company is listed at $6.29 per share and has paid out $0.31 cents in fully franked dividends for 30 June 2018. If you invested in Platinum at market prices, you would lock in a 4.9% dividend yield and an expected yield of 5.7% in 2020.
Platinum pays out approximately 95% of its profits as a dividend which leaves comparatively little money to be reinvested in business operations. Whilst normally raising red flags for capital growth prospects, book value growth on retained profits has increased 78% in the last 10 years. Additionally, funds management is an incredibly scalable service which affords Platinum the flexibility to reinvest profits as it sees fit.
Despite a mildly elevated P/E ratio of 19, you’d be forgiven for choosing this business as a place to park your money in the current interest rate climate. However, investing in Platinum in recent times has not been for the faint hearted.
The share price has been a rollercoaster over the past year with a 52-week high of $8.72 and low of $4.25. Whilst there has been potential for significant capital growth, poor timing could also have seen significant losses. Interestingly, its funds management service is where your money may have been best suited.
Funds under management have grown from $23.96 billion in April 2017 to $28 billion by April 2018. This is primarily due to the performance of the company’s larger managed funds. Platinum’s International, European, Japan, International Brands and MLC Platinum Global Funds have all returned between 18.5% and 24.1% in the last year. With the business performing well, dividends and capital growth should follow. As such, some brokers have labelled Platinum as a moderate buy while others are exercising some caution with a hold rating.
Regardless of how you choose to expose yourself to Platinum’s operations, concerns to be considered are global and local market sentiments, which as we know, are largely unpredictable. However, with no debt on its balance sheet, the company is comparatively well poised to deal with any adverse impacts that the global economy can throw at it.
Platinum Asset Management is a fantastic company with a sizeable dividend on current figures. Whilst I’d be happy to hold onto the company, I’d be hesitant to enter at these elevated prices with how it has fluctuated recently.
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Motley Fool contributor Matt Breen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Platinum Investment Management Limited. 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 Scott Phillips.