There is something to love and hate in almost every stock. But today, I’m in a positive mood, so here are five things I love about Prudential (LSE: PRU) (NYSE: PRU.US).
I called this one right
You can’t time the market, they say, but sometimes you can pick up a great stock that has fallen out of favour, and wait for things to get better. That’s what I did with Prudential, buying my stake shortly after chief executive Tidjane Thiam made a hash of his £36bn attempt to buy AIA Group in 2010. While shareholders were calling for his head (happily they didn’t get it), I went shopping. The stock has grown 93% since then.
It has delightful demographics
Prudential is cashing in on two global demographic trends right now. Its Asian savings is growing fat on Asian middle class growth, while its US and UK segments should cash in as the baby boomers kick and scream (and plan) their way into retirement. Demographics is destiny, the saying goes. If so, that’s great news for Prudential.
It’s in the results business
And boy, is it delivering. First-half operating profits rose 22% to £1.41bn. This included an 18% rise in Asian operating profits to £512m, a 32% rise in its Jackson US business to £582m, and a 17% rise in subsidiary M&G to… need I go on? Shareholders have reaped the benefit, with a 43% share price rise in the past 12 months, against 12.5% for the FTSE 100 as a whole.
Yes, its dividend is disappointing, but…
.. it’s getting better. Given all that growth, it seems petty to grumble about Prudential’s lowly 2.5% yield, but it pales against Aviva (4.69%), Legal & General (3.82%) and Standard Life (4.27%). But management is on the case. It recently proposed an interim dividend of 9.73p per share, up 15.8%. The yield is forecast to hit 2.9% at the end of 2014. Again, not great, but it’s heading in the right direction.
There’s plenty more to come
The Asian middle classes aren’t going to stop growing. Those baby boomers aren’t going to stop retiring. Cash-strapped governments aren’t going to start splurging on state pensions (so people will have to make more self-provision). The eurozone isn’t going to recover any time soon, but that’s fine, because Prudential has minimal exposure (unlike, say, Aviva). No wonder the growth figures look great. It is on forecast earnings per share (EPS) growth of 8% this calendar year and a meaty 14% in 2014. And there is plenty to love about that.
> Harvey owns shares in Prudential and Aviva. He doesn't own any other company mentioned in this article