Image source: Getty Images
Aberdeen (LSE: ABDN) shares are a good example of a great advantage that FTSE indexes offer over similar global markets. This is a wide selection of stocks offering steady, high dividends that, when compounded, can generate huge returns over time.
These are driven by a far higher concentration of mature, cash‑generative sectors — banks, insurers, energy, miners, asset managers, and telecoms — than in other major global indexes.
The US’s S&P 500 is dominated by tech and growth stocks, which reinvest heavily and pay much lower yields. European markets sit somewhere in the middle, as do Asian ones, but both are generally below the FTSE’s payout levels.
What sort of returns can be made?
From 2020 to now, Aberdeen has paid an annual dividend of 14.6p. That resulted in average annual dividend yields of 7.7% in that year, 6.1% in 2021, 7.7% in 2022, 8.2% in 2023, 10.3% in 2024, and 7.1% in 2025.
These changing yields, despite a steady dividend, highlight that these returns can go down or up along with a firm’s share price.
Analysts forecast Aberdeen’s dividend yield at 7% this year, and remaining the same until 2028 at least.
How’s this translate into long-term income?
A £20,000 holding in the firm (the same as mine) would make investors £20,193 in dividends after 10 years and £142,330 after 30 years.The figures are based on the forecast 7% as an average, and on ‘dividend compounding’ being used.
That endpoint would coincide with early retirement options around 50 if someone started their investment journey about 20.
The total value of the holding in Aberdeen would be £162,330 by that point, including the original £20,000 investment.
And that would be paying an annual income of £11,363 from dividends alone by that stage!
Does the business look strong?
Aberdeen is not without its risks, as with all firms. One is that its ongoing reorganisation — involving cost‑cutting and platform simplification — takes longer than expected. This could delay the realisation of higher margins and increased profits that it anticipates. Another is any weakening in the global economy, which could deter investors from opening new accounts.
Nonetheless, its 2025 results released on 3 March this year showed IFRS profit before tax surging 76% year on year to £442m. It reflected a stronger platform performance and the early benefits of its simplification programme.
Net outflows also narrowed sharply to £1.7bn from £6.1bn, signalling stabilising client activity. Investment performance strengthened too, with 84% of assets outperforming the relevant benchmarks over one year and 80% over three.
My investment view
Aberdeen brings together everything that makes the FTSE such fertile ground for income investors, in my view. It displays high dividend yields, steady payouts, and the power of long‑term compounding.
Recent results also point to a business gradually strengthening, with profits rising sharply and flows stabilising. For me, that combination of dependable income and recovering operational performance is exactly what I want in a long‑term holding.
That is why Aberdeen remains firmly on my buy list — and why I am continuing to add to my position. Other very high-yielding stocks in other sectors have also caught my attention very recently.
This story originally appeared on Motley Fool
