Why the Standard Life Aberdeen share price could smash the FTSE 100 this year

Having fallen by 14% since the start of the year, 2018 has not been a successful year for Standard Life Aberdeen (LSE: SLA) thus far. The company has experienced major disappointment through the loss of a large client, with investors seemingly becoming less certain about the merged entity's future prospects.

Now though, the company seems to offer good value for money. Alongside its dividend growth potential, there seem to be clear catalysts to push its share price higher and allow it to outperform the FTSE 100. As such, it could be worth buying ahead of a number of shares that appear to be overvalued, such as one company that released results on Tuesday.

Positive outlook

The Standard Life Aberdeen share price has been hit hard by the loss of Lloyds as a customer. It announced a few months ago that it was ending the contract where around £109bn was managed by Standard Life Aberdeen. This is the company's biggest contract and while it had been discussed as a potential risk following the merger (since Lloyds had the right to end the agreement in the instance of a merger), it was seen as unlikely by many investors.

The result of the loss of the contract was a major fall in the company's share price which accounts for the majority of its decline since the start of the year. However, with a positive outlook for the global economy and world stock markets, demand for the company's services could remain high. Investor sentiment has been positive in recent weeks, and this could help to improve its financial performance over the medium term.

Dividend potential

With Standard Life Aberdeen expected to grow its dividends per share by 6.6% per annum over the next two years, it seems to offer a solid income outlook. This could put it on a dividend yield of 6.7% in 2019, which could have significant appeal to a wide range of income investors. It may also signify that it offers good value for money at a time when the FTSE 100's yield is 3.9%.

Of course, it's not the only FTSE 100 stock with high dividend growth potential. Reporting on Tuesday was sales, marketing and support services company DCC(LSE: DCC). It also has a solid income outlook, but may now be overvalued after its 8% share price rise in the last month.

Margin of safety

DCC's annual results showed that the company has been able to deliver strong performance across all of its divisions. Its total revenue increased by 12.6%, while adjusted operating profit moved 11.1% higher to £383.4m.

It completed acquisitions across all of its divisions, with £670m spent on M&A activity, which is the highest level of spend in its history. And with it having a successful track record of integrating new businesses, its strategy of expanding geographically through acquisition seems to be sound.

With DCC forecast to post a rise in dividends per share of 13.4% per year over the next two financial years, it is set to yield 2% in 2019 and could become increasingly attractive from an income perspective over the medium term. However, with it trading on a price-to-earnings (P/E) ratio of around 21 and forecast to post earnings growth of 5% next year, it may be overvalued.

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Peter Stephens owns shares of Lloyds Banking Group and Standard Life Aberdeen. The Motley Fool UK has recommended Lloyds Banking Group and Standard Life Aberdeen. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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