It would be completely understandable for investors – particularly those who rely on the share market for meeting their day to day living expenses – to be feeling somewhat dismayed at the lacklustre returns from the ASX over not just the past year but in fact the past decade.
Consider these facts…
The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen 6% in the past 12 months, is up just 10% in the past five year and has eked out a gain of just 12% over the past decade!
Those figures are (thankfully) prior to the gains from dividends which do add materially to the overall returns however those same figures do highlights just how low the index's capital gains have been.
While the mediocre historic returns are disappointing, there is a benefit…
The recent lacklustre market performance mean that many stocks – including a number of high-quality blue-chip companies – are now available at more attractive prices that they were previously.
Here are three financial stocks which could be good long term additions to your portfolio…
AMP Limited (ASX: AMP)
For the half-year ending June, this leading wealth management company reported a 19% surge in revenues to $8.6 billion and an 11.8% increase in underlying profit to $570 million. The profit growth led the board to declare a 17.6% increase in the interim dividend to 14 cents per share (cps).
Amongst the highlights from the result was a 13% increase in Assets under Management (AUM) and a 13% rise in Wealth Management divisional profits to $207 million; the Investment Management division, AMP Capital reported a 26% rise in profits to $72 million; profits from the Wealth Protection business rose 9% to $99 million and AMP Bank saw a 19% jump in profit to $50 million.
Morningstar's data shows an analyst consensus forecast for full-year earnings per share (EPS) of 38.7 cps. With the shares closing Tuesday's trading session at $5.70, this implies a forward price-to-earnings (PE) ratio of 14.7 times.
Insurance Australia Group Ltd (ASX: IAG)
For the year ended June 2015 gross written premium increased 17% to $11.4 billion but net profit slumped 41% to $728 million which forced a drop in the dividend for the year from 39 cps to 29 cps.
The cause of IAG's profit drop was a jump in adverse weather-related events which saw claim costs rise above $1 billion. Management's preferred measure of profitability – the underlying insurance margin – contracted by 1.1% to 13.1%.
Morningstar's data shows an analyst consensus forecast for full-year EPS of 40 cps. With the shares closing Tuesday at $4.96, this implies a forward PE ratio of 12.4 times.
Suncorp Group Ltd (ASX: SUN)
Total net profit after tax came in at $1.1 billion. During a year in which the group was affected by severe weather conditions the general insurance division managed to contribute a $756 million profit, while the bank division contributed $354 million.
The banking division produced a solid performance with 55% profit growth recorded. The division benefitted from improvements in loan growth of 3.9% and growth in net interest margin.
Morningstar's data shows an analyst consensus forecast for full-year EPS of 100.9 cps. With the shares closing Tuesday at $12.36, this implies a forward PE ratio of 12.2 times.
