AMP Ltd (ASX: AMP) and ASX Ltd (ASX: ASX) are well known to investors. While their share prices have outperformed the rising market, both companies are positioned to benefit further, should equity markets and the economy continue to improve. This is also while providing investors with a fully franked 4.4% dividend yield.
Diversified wealth manager AMP Ltd, holds a commanding position and is well placed to benefit from the continual rise of superannuation in Australia. The takeover of AXA Asia Pacific increased the distribution and reaches of AMP’s products and increased Assets under Management (AUM) which now stand at $136 billion. It is this AUM balance, along with a significant client base looking for wealth management – including superannuation advice – that positions AMP to benefit from any further improvement in the outlook for equities and in investor appetite for equity products.
Australian stock exchange operator ASX Ltd also happens to be currently trading on a trailing yield of 4.4%. Its business is significantly skewed towards buoyant equity markets. The ASX’s business model is ultimately a volume game. So the more participants trading equities, futures, options and derivatives, the better it is for the ASX. This naturally occurs on a sustained basis when there is confidence in the economy and in the outlook for company earnings growth. So the recent improvement in average daily trading volumes to $5 billion from the start of the year when they were barely $4 billion is a good sign.
AMP and ASX are trading on trailing price-to-earnings multiples of 22.5 times and 20.5 times respectively. This is not cheap however the moats that each company possesses, means that it is reasonable for the stocks to trade at a premium compared to your average company. The dividends paid by these two companies should be maintainable, which can provide investors with confidence if purchasing for yield. Given the strong performance of the market as a whole this year, the chances of (at least) a short term correction are increasing ,which means there may be a better opportunity to purchase these two companies in the future.
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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Tim McArthur does not own shares in any of the companies mentioned in this article.