Here’s why it’s time to buy AMP Limited

A period of weakness in the share price could be coming to an end.

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AMP Limited (ASX: AMP) is one of the ASX’s top 20 companies with a market capitalisation of $15.5 billion; the firm is also one of Australia’s largest providers of financial planning advice, wealth management services and income insurance products.

Like its financial service peers which include BT Investment Management Ltd (ASX: BTT) and IOOF Holdings Limited (ASX: IFL), AMP is positioned to benefit from a tailwind of long-term rising equity markets, increasing per capita income and higher compulsory superannuation contributions.

With AMP’s share price at $5.30 the stock has provided a near flat return to shareholders over the past 12 months, in comparison BTT stock has soared 93%, IOOF also has little to show with a gain of just 3% and the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 10.5%.

Whilst the last year might not have provided great returns for AMP shareholders, here are three reasons why the future might.

1)      Equities markets are set to keep rallying. Higher equity markets mean higher funds under management for AMP which in turn leads to higher management fees for AMP.

 

2)      The income insurance division is under close attention from management which should hopefully result in an improved performance going forward.

 

3)      A forecast dividend of 25 cents per share in 2014, places the stock on a healthy dividend yield of 4.7%.

Motley Fool contributor Tim McArthur owns shares in BT Investment Management Ltd.

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