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Here’s why Suncorp Group Ltd and Computershare Limited could be your ticket to riches

Do you dream of beating the market?

Suncorp Group Ltd (ASX: SUN) and Computershare Limited (ASX: CPU) would have made your dream come true. These two big-name stocks more than doubled the 5.8% rise of the S&P/ ASX 200 Index (ASX: XJO) (Index: ^XJO) over the past twelve months.

The good thing about these two is that it doesn’t have to stop there. They still have more room to run.

Computershare is a share registry and transaction agency for the buying and selling of stock. It gets paid to process millions of transactions, so as the stock market rises the company benefits.

It is up about 20% in the past twelve months. Market watchers may say a correction is due after such a long bull run in the US financial markets, but that doesn’t mean everything has to stop.

There still is more to run because usually bull markets end when the economy over-extends itself and interest rates are high to control the upward momentum. Neither is really in place in the US or Australia. A 10% correction may actually be good because you could pick up Computershare for a bit of a discount.

Insurer and banker Suncorp Group has also recovered strongly from its lows two years ago. Within the past year, it has gained 14% on the back of a strong full year result. Its banking segment went from a $343 million loss to a $228 million net profit after selling off its bad loan book. It is growing with its home loan business from the rising housing market as well.

The insurance market is improving with less natural disaster damage claims, making earnings spreads bigger. Also, the amount of cost savings projected to come from its business simplification program is a whopping $265 million annually by 2016. That’s a significant number when compared to the total group net profit of $730 million for FY 2014.

What has really made Suncorp popular among investors is its record for special dividends. When it has surplus capital in excess of its budget targets, it returns that capital to shareholders.

In FY 2014 alone it bumped up dividends by 40%, thanks to a 30 cents per share special dividend on top of the 75 cents per share full year dividend. With future savings and potentially bigger earnings margins, it may have further dividend increases. It currently has a hefty 5.7% yield fully franked.

This is my preferred stock of the two because of the generous dividends and possibility of continuing dividend income growth in the future. Other investors, especially self-managed super fund owners, will be looking for stocks like Suncorp to drive their future retirement wealth as well, so the stock has legs from here on out.

Along with Suncorp and Computershare, there is also another stock that could have that market-beating potential. The Motley Fool’s top analyst, Scott Phillips, recently identified one cheap but growing ASX stock with a 6.2% grossed-up dividend yield which could be a standout buy.

The Motley Fool has written a free report “The Motley Fool’s Top Dividend Stock for 2014-2015” which it’s sharing with all interested investors.

If this is you, simply click on the link here and enter your email address – it takes less than 30 seconds – and we’ll send it to you, completely FREE!

 

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. The Motley Fool owns shares in Computershare.

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