AJ Bell hikes dividend by 26% on back of bumper profits and revenues

AJ Bell has announced a major dividend increase following solid growth in half-year profit and revenue.

Pre-tax profit on the online trading platform was up 61 per cent to £41.9m for the six months ended March, from £75.5m last year, while revenue rose 37 per cent to £103.6m.

Growth was mainly propelled by the Bank of England raising UK base rates incrementally from 2.25% to 4.25% over the period, raising the average interest the company received on consumers’ cash accounts.

The Manchester-based firm’s total retail client base and assets under management both rose 7 percent to 469,929 and £73.8 billion respectively.

Meanwhile, net inflows reached a record £0.9bn despite the cost of living crisis leading a growing number of Britons to withdraw money from their ISA, pension and investment accounts to support themselves financially.

Thanks to the solid performance, AJ Bell has recommended paying shareholders an interim dividend of 3.5 pence per share, an increase of 26 percent over the previous year.

Michael Summersgill, CEO of AJ Bell, said the results “demonstrate the strength of our business model and how our diversified revenue streams enable us to perform well in a range of different market conditions.”

He added that the company is “well positioned to benefit” from recent increases in annual pension benefits and the elimination of lifelong benefit pension costs.

Treasury Secretary Jeremy Hunt said he hoped the measures would lead to more retirees returning to work when he announced the changes during his budget speech in March.

Summersgill said: “We have been campaigning for retirement simplification for years and believe these welcome changes will give customers the freedom to invest more in their retirement without worrying about tax penalties as their investments grow over time.”

During the lockdown period, retail investment firms attracted a significant number of new and younger clients trying their hand at investing for the first time.

To capitalize on this trend and compete with rivals such as Hargreaves Lansdown and Interactive Investor, AJ Bell launched the free Dodl stock and fund trading app.

But the retail investment industry faces significant uncertainty in the coming years as higher interest rates make companies more reluctant to borrow money.

While AJ Bell expects to benefit from higher average interest rates in the second half of the fiscal year, it expects revenue margins to be similar to the prior six months due to declining customer cash balances.

AJ Bell Stocks were up 1 percent at 316p early Thursday afternoon, meaning their value is up about 23 percent over the past 12 months.