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4 reasons to buy Australia and New Zealand Banking Group

Shares in Australia and New Zealand Banking Group (ASX: ANZ) have largely tracked the performance of the ASX during the course of 2014. Indeed, ANZ is up 4% since the turn of the year, while the ASX has been able to post gains of 5% during the same time period. However, the future could be a lot brighter for ANZ and shares in the bank could be worth buying for these four reasons:

  1. Earnings growth over the next two financial years is set to be very impressive. Indeed, ANZ is forecast to increase EPS from $2.16 last year to $2.53 in the current financial year, which is an increase of 17.1%. Furthermore, the following year is set to see further growth, with EPS due to reach $2.65. This would represent a year-on-year growth rate of 4.7% and, over the two years, would work out at an annualised growth rate of 10.7%.
  2. As well as growth potential, ANZ offers investors a fat, fully franked yield of 5.1%. This could help to boost incomes at a time when interest rates look set to remain low for a good while longer.
  3. If a 5.1% yield isn’t enough, strong earnings growth looks set to be passed on to shareholders via increased dividends per share. For example, dividends per share are forecast to increase at a rate of 6.2% over the next couple of financial years. Meanwhile, the bank’s dividend coverage ratio of 1.3 indicates that dividends are relatively sustainable moving forward.
  4. As well as strong growth and income prospects, ANZ also offers value for money at current price levels. For instance, it trades on a P/E ratio of just 13.4 and, when this is combined with its previously mentioned EPS growth rates, equates to a price to earnings growth (PEG) ratio of just 1.26. Both of these figures are well below the ASX’s P/E of 16.2 and PEG of 1.83, which highlights the attractive valuation of ANZ shares.

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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

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