Investors who own Magellan Financial Group Ltd (ASX: MFG) shares can rejoice. Today is the day that the Magellan dividend will flow into bank accounts.
Reporting season has only just finished, but some businesses are already getting on with paying shareholders the money they've allocated for them.
Magellan is paying its dividend only three weeks after announcing it. That's a quick turnaround.
How big is the Magellan dividend for shareholders?
Magellan announced that the total dividend for the second half of FY22 is 68.9 cents per share, franked to 80%.
That final dividend comprises an ordinary dividend of 65 cents and a performance fee of 3.9 cents per share.
The franking level of 80% was an increase from the FY22 first half, which was 75%, and it's expected to increase in future years.
This dividend is in line with the company's dividend policy, subject to corporate, legal, and regulatory considerations.
Magellan's ordinary interim and final dividends are based on 90% to 95% of the net profit after tax (NPAT) of the fund's management business, excluding crystallised performance fees.
The annual performance fee dividend is based on 90% to 95% of net crystallised performance fees after tax.
Added to the interim dividend of 110.1 cents per share, this brought the full-year dividend to 179 cents per share. That meant Magellan reduced its total dividend by 15% from FY21.
What happened to the profit?
With Magellan's dividend tracking its profit, it's worth noting that the business experienced a drop in funds under management (FUM), revenue, and profitability.
The average FUM fell 9% over the year to $94.3 billion. However, at 29 July, its FUM had dropped to $60.2 billion.
The fund's management profit before tax and performance fees was down 11% to $470.6 million. The adjusted net profit before tax was down 12% to $515.2 million. The adjusted profit after tax was only down 3%. This is due to a $6.6 million profit being generated by associates (compared to a loss of $41.8 million in FY21).
Outlook for the Magellan share price and dividend
Unless Magellan can regain FUM quickly, it's hard to see that the dividend will get back to its former heights any time soon.
The new CEO and managing director, David George, noted that client confidence has been impacted by changes in the leadership team and personnel, and underperformance of the global shares strategy.
Magellan's focus now is on the core funds management strategy, strengthening processes, and driving consistent and improved investment performance.
George will be giving shareholders an update on his thoughts and strategies in October 2022.
Magellan share price snapshot
Starting mid-July, Magellan shares rose 33% to 11 August. But they have since dropped 18.8%. Over the last six months, Magellan shares are down 2.5%.
