Results from this 'secret' income stock prove why it is a dividend champion

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One of the market's secret dividend stocks reported its results for 2016 this morning, and the figures make for good reading. The stock, which currently supports a forward dividend yield (based on City estimates) of 5.8%, has struggled to gain ground over the past year thanks to concerns about the fallout from Brexit on financial services and headwinds buffeting the asset management sector. 

Nonetheless, the figures out today from insurer Standard Life(LSE: SL) show that not only is the company managing to navigate these headwinds, but the firm is also growing steadily. 

Steady growth 

For 2016, Standard's pre-tax operating profit rose 9% to £723m, beating City estimates of £684m. Assets under administration increased 16% to £357bn, up from £307.4bn at the end of 2015. Analysts were expecting the company to report an AUM figure of around £335bn. Earnings per share expanded 13% to 29.5p from 26.1p in the year-ago period, once again ahead of consensus estimates. Free cash flow generation for the year rose 9% to £502m. 

Of the back of these impressive figures, management has decided to increase the firm's final dividend payout for the year by 8.9% to 13.4p bringing the full-year payout to 19.8p, up 8% year-on-year.  

Alongside today's results, management also noted that the company is already seeing the benefits of Standard's drive to improve its asset management offering and expansion into India. Further geographical expansion is planned. At the end of last year, Standard increased its stake in Indian insurance firm HDFC Life. It aims to combine it with New Delhi-based insurer Max Life to create a significant player in the Indian private life insurance business. 

Unloved 

Standard is using its existing asset management base to expand into emerging markets, and at the same time, the firm is improving its offering here for customers in the UK. 

For some reason, the market seems to be ignoring this growth and its record of creating value for shareholders. Indeed, based on today's figures, shares in Standard are currently trading at a trailing twelve month P/E of 12.7. Prior to today's numbers, City analysts had been expecting the firm to report earnings per share of 28.8p for 2017, but now this figure looks seriously out of date.

If we assume Standard can repeat its 2016 performance during 2017 and grow earnings per share by 10% or more, the group could report earnings of 32.5p per share for 2017, indicating a forward P/E of 11.5, a relatively low multiple for a business reporting a double-digit growth rate.  

The bottom line 

Overall, after today's results, it's clear that Standard is one of the FTSE 100's most under-appreciated dividend stocks. The company has blown City estimates out of the water for 2016 and the shares look cheap compared to Standard's projected growth rate. What's more, the shares support a dividend yield of 5.8% on a forward basis, which is 1.7 times above the FTSE 100 average. 

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Rupert Hargreaves owns shares of Standard Life. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.