Johannesburg — ALMOST three years have passed since I reviewed Coronation Fund Managers ( Coronat ). The review then appeared in a Forecast Factory column, the predecessor to the Private Investor column

On November 10, the company reported excellent results for the year ended September 30 2009.

The features were the increases of 24% in assets under management to R155bn, 24% in diluted headline earnings per share to 60,5c, and 9% to 50c in dividends per share.

The share price is trading around R8,50. Its historic market ratings are, therefore, a price- earnings ratio of 14, an earnings yield of 7,1% and a dividend yield of 5,9%. The ratings, with the exception of the dividend yield, don't attract investment.

I'm not convinced that market sentiment will remain steadfastly bullish. As you know, when the market corrects or reverses, cash flows out of investment funds. As fund managers earn profits from their charges on managing these assets, their earnings are sensitive to market sentiment and their future earnings are likely to be volatile.

Coronat's bottom-line diluted headline earnings per share have not been unduly volatile over the past five years, between financial years 2005 and 2009. The respective figures are 40,9c, 46,8c, 72,7c, 48,6c and the latest published figure of 60,5c.

The 2007 figure of 72,7c per share was strikingly high and had of course been flavoured by the bull market. No doubt, too, the bull market persuaded management to buy back shares on the argument that the share price was undervalued.

In addition, the 2007 distribution to shareholders was 67c a share, 20c as a capital distribution and 47c as dividend. The 2006 and 2005 respective distributions were 53c and 60c a share, and last year the dividend was 46c.

In the review I made three years ago, I was attracted by the share on my guesstimate of forward headline earnings per share of 60c for the financial year 2007 -- much lower than the Forecast Factory consensus of 49,8c and also much lower than the actual figure of 72,7c mentioned above. Its share price then was R6,55 and, based on my guesstimate, the forward price- earnings ratio was 10,9, the earnings yield was 9,2% and the distribution yield was about 10%.

On a one-year forward view, the share price, I concluded, was undervalued. I noted, however, my misgivings on the bull market, but by November 2007, the share price had peaked to R10. It then began its descent to close to R4,50 last December .

The share price decline, as my short performance history above shows, closely corresponded to the change in bottom-line earnings per share that took the share price rating back to reality -- a historic price-earnings ratio of 9,2, an earnings yield of 10,9 and a distribution yield of 10,2%. This was good value, especially on the dividend yield, if Coronat would do as it did -- exploit the weak market to pull new investment into its funds.

Its historic dividend yield is comfortably high for high- dividend income investors. The additional criterion is that the income should be expected to grow as bottom-line earnings grow. I'm reasonably confident Coronat will measure up -- the return could be jerky because its profit is so sensitive to stock market volatility.