Supported by the proposed merger of Aberdeen Asset Management (LSE: ADN), I reckon the long-term earnings outlook at Standard Life (LSE: SL) is worthy of serious attention from savvy investors.
The financial goliath sources around half of profits from the life insurance sector, but is looking increasingly towards the asset management industry to deliver future growth.
Some have raised eyebrows at its decision to link with Aberdeen, with severe economic turbulence in developing markets more recently prompting investors to pull their cash out of the Scottish business en masse. But I reckon Standard Life’s merger could pay off as, over a longer time horizon, the combination of booming population levels and rising personal wealth levels makes Asia an attractive destination for forward-thinking investors.
Besides, Standard Life and Aberdeen have identified £200m worth of cost synergies (to be achieved by 2020) which should give earnings another encouraging kick.
Plenty of upside
And in the meantime, City analysts expect Standard Life to put to bed the extreme earnings volatility of recent years.
For 2017 an expected 57% earnings charge is predicted, building on the 39% rise enjoyed last year. And the insurer is expected to keep the momentum up with a 7% bottom-line uptick in 2018.
Current Square Mile forecasts make Standard Life exceptional value for money too, a forward P/E ratio of 12.3 times falling comfortably below the FTSE 100 forward average of 15 times.
But it is Standard Life’s dividend profile that should really attract investors, in my opinion. A predicted 21.4p per share dividend for this year yields a staggering 5.9%, while an anticipated 23p reward for 2018 drives the yield to 6.4%.
With the Aberdeen merger set to boost Standard Life’s product range considerably, and with it future earnings growth, I expect the enlarged group to deliver stunning investor returns in the years ahead.
A wise investment
I also believe Hargreaves Lansdown (LSE: HL) is a hot growth bet as savers seek to protect themselves from rising inflation.
You see, with the increasing cost of living steadily eroding the value of cash, those stashing away for a rainy day are increasingly seeking alternatives to the rock-bottom interest rates offered on bog-standard savings accounts. And Hargreaves Lansdown’s broad range of services puts it at the front of the queue for those looking to invest wisely.
So just like Standard Life, Hargreaves Lansdown is also expected to enjoy handsome earnings growth during the medium-term at least, City analysts forecasting expansion of 15% and 13% in 2017 and 2018 respectively.
And I believe the investment manager is a wise stock selection despite an elevated forward P/E multiple of 31.5 times. Over the long term I believe Hargreaves Lansdown should prove a profitable growth share returns as private investor activity keeps on surging (assets under administration stood at a record $70bn as of December), helped by the structural opportunities created by an ageing populace.
