Aegon: A High Dividend Yield Is Not Enough To Buy

2025-03-13 08:43:52 ET

Summary

• Aegon's shift to capital returns from its exit of the Dutch market has led to a high dividend yield, currently at about 6.3%.
• Despite a strong balance sheet and excess cash, Aegon's valuation at 1.2x book value is higher than justified by its profitability.
• Aegon's profitability is lower than peers, with a 9.2% ROE in 2024, compared to U.S. life insurance peers' ROE of around 20%.
• I maintain a 'Hold' rating as Aegon's high dividend yield and capital returns are already priced in, limiting upside potential.

As I’ve covered about one year ago , while Aegon ( AEG ) has made significant efforts to improve its business fundamentals over the past few years and its investment case was at the time more geared to income rather than undervaluation like it was in the past, I saw its shares as fairly valued and considered its upside potential to be limited at the time. Since then, its shares have performed in line with the overall stock market (including dividends), showing that my view on the stock was right....

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