Prudential (LSE: PRU) has outperformed almost all of its peers over the past five years. From June 2010 to date, the company’s shares have returned more than 200% excluding dividends.
Over the same period, earnings per share have roughly doubled, and the company has hiked its dividend payout by 70%. Prudential has outperformed the FTSE 100 by 169%, excluding dividends since 2010.
This performance is set to continue.
During 2015, City analysts expect the company’s earnings per share to expand by 15%. Earnings growth of 11% is expected for 2016. What’s more, according to forecasts, Prudential is expected to hike its dividend payout by 10% per annum for the next two years.
However, it remains to be seen if Prudential can actually hit these lofty growth targets.
High-quality management
Prudential’s growth during the past five years has been driven by the group’s now ex-CEO Tidjane Thiam, one of the most respected financiers in the City.
Under Thiam, Prudential refrained from chasing sales growth. Instead, the business remained selective in choosing its customers, and this strategy has paid off. A well-timed expansion into the Asian insurance market also helped.
Thaim has now been replaced by Mike Wells, who earned his stripes at one of Prudential’s US divisions. And if Wells sticks to Thiam’s strategy, Prudential has a bright future ahead of it. Prudential should benefit from the growth of Asia’s middle class over the next few years.
Income champion
Legal & General (LSE: LGEN) hasn’t quite been able to chalk up the same performance as Prudential over the past five years, but it has come close.
While the company’s shares have outperformed those of Prudential by approximately 30% since 2010, the company’s earnings per share have only increased by 33% over the same period.
Still, Legal & General’s most attractive quality is the company’s dividend. At present, the company supports a forward dividend yield of 5%. Over the past five years, the payout has expanded by 180%.
Growth of 10% per annum is expected for the next two years.
Thanks to this growth, if you’d brought Legal & General’s shares during 2010, you would now be receiving 15% per annum in dividends alone.
Bigger is better…
Lastly, Aviva (LSE: AV). Aviva’s decision to acquire Friends Life has transformed the group into the UK’s largest insurance, savings and asset management company.
This new-found scale should help Aviva dominate the UK’s retirement savings market, which is becoming increasingly competitive.
That said, the retirement savings market continues to grow so Aviva shouldn’t have any trouble growing sales. Additionally, Aviva should be able to use its size to lower costs and achieve economies of scale that few other competitors can manage.
… but will take time
Unfortunately, it will take time for these benefits from the merger to flow through. City analysts expect Aviva’s earnings to fall slightly this year before rebounding by 12% during 2016.
Nevertheless, the group is well placed to throw its size about and steal business from competitors when the integration is complete.
Aviva currently trades at a modest forward P/E of 10.5 and supports a dividend yield of 4.1%.
