3 reasons Insurance Australia Group Limited is the ultimate stock

After having dropped as low as $5.34 in March, shares in insurance giant Insurance Australia Group Limited (ASX: IAG) seem to have staged a recovery and could well have much further to climb. With shares currently sitting at $5.83, there are plenty of reasons to like the company. Here are three:

1) An incredible dividend. In light of the low interest rate environment and global economic uncertainty, investors still want bumper dividends. Insurance Australia Group Limited has just what you need, offering a fully franked 6.2% dividend yield. That compares to Commonwealth Bank of Australia’s (ASX: CBA) 4.8% yield or Telstra Corporation Ltd’s (ASX: TLS) legendary 5.5% fully franked dividend yield.

2) The company will also benefit when interest rates inevitably rise. Insurers make a large portion of their earnings from investing the premiums they collect from customers. When interest rates rise, so will Insurance Australia Group’s earnings.

3) Insurance Australia Group is trading on a lower P/E ratio than most of its competitors. Trading on a multiple of 11.1 times, AMP Limited (ASX: AMP) and Suncorp Group Limited (ASX: SUN) are trading on multiples of 19.9 and 15.4 times, respectively.

Another stock with a bumper dividend

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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