Are you on the hunt for a generous dividend yield for your income portfolio?
If you are, then it could be worth checking out the Australian stock in this article.
That's because it has been named as a buy and tipped to provide investors with a better dividend yield than income investor favourites BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA).
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Which Australian stock is a buy?
The stock in question is Regal Partners Ltd (ASX: RPL). It is a medium sized boutique asset manager which manages a number of alternative investment strategies and performs investment management and investment advisory services.
It invests in public and private securities across the world but with a key focus on Australia, employing market neutral and absolute return strategies.
Analysts at Bell Potter are feeling very positive about the company. They believe that its strong investment and operating performance is not being appreciated by the market. It feels that this means the Australian stock is undervalued at current levels. It said:
It has continued to show value creation in CY24 with fund inflows, new fund launches, strong performance (which is expected to translate into high performance fees), and recently another acquisition. It is to acquire 100% of Merricks, a leading alternative investment manager focused on private credit investments across commercial real estate, agriculture, and other assets with $2.9bn of FUM.
This acquisition will add to FUM, is enhancing to EPS, but does not create an immediate overhang of stock. This latest acquisition further highlights the entrepreneurial culture, illustrated by the expansion through M&A and its growth through the launch of new strategies. It is also highly profitable earning high management fees and performance fees. We feel this strong performance is not reflected in the share price and see considerable upside.
Big return potential
Bell Potter has a buy rating and $4.97 price target on its shares. This implies potential upside of 39% for investors from current levels.
As for income, the broker believes some above-average dividend yields are on the way from this Australian stock. It is forecasting fully franked dividends per share of 19.5 cents in FY 2025 and 22.1 cents in FY 2026. Based on its current share price of $3.57, this would mean dividend yields of 5.5% and 6.2%, respectively, for income investors.
This means that a total potential return of approximately 45% is possible over the next 12 months according to the broker.
