Should I Buy Standard Life plc?

Harvey Jones asks why the market appears to have gone cool on Standard Life plc (LON: SL) despite its strong growth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m out shopping for shares again. Should I add Standard Life (LSE: SL) to my wish list?

Last time I looked at insurer Standard Life, in December 2012, I was impressed. Its share price chart resembled an escalator, moving relentlessly upwards year after year, a smooth and steady riser in volatile times. The 200-year old insurer also looked well placed to survive the Retail Distribution Review, the regulatory overhaul of the financial services industry, and was looking to cash in on auto-enrolment, which should give millions of employees a company pension for the first time. My only quibble was that trading at 16.5 times earnings, it looked a little pricey. That was then, would I buy it today?

All good things come to an end, and so has the Standard Life escalator effect. Its share price is down more than 8% in the past six months, against a modest 1.3% rise for the FTSE 100 as a whole. It is the weakest of the big four UK insurers in that time, with Aviva leading the pack with 26% growth, followed by Legal & General Group (15%) and Prudential (1.5%). So why has Standard slipped?

Wonderful Life

Last month, it reported a 28% rise in half-yearly 2013 pre-tax UK profits to £161 million, while assets under management rose 7% to £232bn. New sales of long-term savings rose 21% to £12.2bn. It also reported strong growth in fee-based revenue and a healthy balance sheet, and raised the interim dividend 6.5% to 5.22p. Chief executive David Nish said: “Standard Life has made really good progress in the first half of the year, delivering substantial growth in sales, flows and assets, all driving higher revenues and operating profits.” It is also growing strongly outside the UK, in Canada and Asia. What more do people want?

Standard Life isn’t even that expensive any more, trading at 11.6 times earnings. That makes it far cheaper than Legal & General at 14.4 and Prudential at 15.1 times earnings. Its yield is better than both of them, at 4.27% against L&G’s 3.83% and Prudential’s 2.51%. Only Aviva yields more at 4.63%.

High Standard

QE tapering could hit fund inflows and assets under management, which would hurt Standard Life. That partly explains recent volatility. But I’m impressed by its recent performance, even if many brokers aren’t (Credit Suisse and Bank of America are both ‘neutral’ on this stock), and I like the fact that it’s a fair bit cheaper than it was. Forecast earnings per share growth of 11% next year, which would take the yield to 4.9%, looks worth having. I reckon that the recent share price slide is a buying opportunity, but that’s just me. Life is what you make it.

Standard Life is good, but it isn’t good enough to feature in our special report 5 Shares To Retire On. This free report by Motley Fool share analysts names five FTSE 100 favourites to secure your retirement. To find out more, download this report now. It won’t cost you a penny, so click here.

> Harvey Jones owns shares in Aviva and Prudential. He doesn’t own any other company mentioned in this article

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

FTSE 100 or S&P 500: where should I invest?

UK investors are often drawn to the high growth of US stocks. But there are pros and cons to be…

Read more »

Investing Articles

2 of the best US growth and dividend stocks to consider!

These heavyweight US stocks have been delivering tasty investor returns for decades. Here's why they could remain great picks for…

Read more »

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »