Bumper upgrade gives this FTSE 250 stock another lift

A forecast of a “bumper” dividend after a City firm made earnings upgrades that “don’t come much bigger” today fired Jupiter Fund Management (LSE:JUP) shares to their highest in two years.

The FTSE 250-listed stock has now doubled in value since April, having recently struck a deal to buy the UK’s largest asset manager focused on serving non-profit organisations.

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As well as the acquisition of CCLA, Jupiter has promised a one-off capital distribution to shareholders in respect of 50% of performance fee-related revenue generated in 2025.

The shares resumed their ascent today, reaching 144p after broker Peel Hunt made some significant increases to earnings forecasts and raised its target price from 90p to 156p.

This year’s rally reverses the downward share price trend of recent years after material outflows left Jupiter’s assets under management some 22% lower than the peak in 2021.

Peel Hunt said today: “Regardless of the flow environment, we see Jupiter as set to deliver attractive earnings growth in the coming years.”

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The City firm adds that the material contribution from performance fees in 2025 should translate into a “bumper” full-year dividend of 12.2p, up from the previous year’s 5.4p and a projected dividend yield of 8.5%.

Peel Hunt assumes that the dividend then reverts back to the usual policy of paying 50% of earnings in the 2026 financial year, equating to 6.1p.

Jupiter’s £100 million acquisition of CCLA marked a significant step forward in delivering its key strategic objective of increased scale, specifically within its home market of the UK. 

CCLA manages more than £15 billion of assets on behalf of charities, religious institutions and local authorities.

The move addresses City concerns that material outflows over the last few years have left the business with a cost base too high for the level of assets under management.

Although the short-term outlook for flows remains difficult to predict, Peel Hunt said the acquisition should allow Jupiter to deliver an attractive earnings profile that’s supported by the delivery of cost synergies.

It increased its full-year earnings forecast by 83%, driven by  the benefits from the material performance fees highlighted by the company in half-year results

Further ahead, building in the acquisition of CCLA and related cost synergies leads to 51% and 66% upgrades for 2026 and 2027 estimates respectively.

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Peel Hunt said a current year price/earnings multiple of 9.2 times did not reflect the medium-to-longer term outlook, given the impact of performance fees.

The risks to its assumptions include higher-than-expected outflows following a change in investor sentiment or the negative earnings impact if Jupiter loses an investment team responsible for a material fund.

The broker said: “While the CCLA business has a diverse client base, any outflows post acquisition could reduce the level of earnings accretion expected.

“However,  we feel that the current share price already discounts these risks to a large extent, and therefore upgrade our recommendation from Add to Buy, with a new target price of 156p.”