Broker snap: Man overboard on divi payments

17th Mar 2010 12:48

Hedge fund manager Man Group is comfortably the highest yielding stock among FTSE 100 constituents, but a rebasing - a City euphemism for a cut - of the dividend could be on the way, according to Morgan Stanley.The shares are currently yielding 11.77% based on historical dividend payments and though Morgan Stanley thinks the company will dip into reserves to hold its divi at 44 cents in fiscal 2010 it may not be so keen to do so again in fiscal 2011.'Given ... below-average performance fees and slower recovery in sales momentum, we see an increasing likelihood that dividends will be rebased and assume a ~45% reduction in DPS [dividend per share] to $0.25 for FY11e [fiscal year 2011 estimate], implying just covered by FY11 earnings,' Morgan Stanley analyst Bruce Hamilton said.The company's flagship fund, AHL, 'remains 16% below performance fee earnings levels' as it enters fiscal 2011, Hamilton notes. 'As such we see significant risks that performance fees will again disappoint relative to consensus expectations and against historical trend in FY11,' he added.Hamilton has chopped his price target for Man from 340p to 260p. Elsewhere in the broking community Numis Securities has downgraded Man from 'buy' to 'add'.