Having tracked the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) down around 10% over the past six months, now could be an attractive time for long-term investors to consider adding blue-chip financial services giant AMP Limited (ASX: AMP) to their portfolio.
Here are three reasons why now could be a good entry point:
1. Third quarter shows good momentum
With a financial year which operates on a calendar year basis, investors recently got the opportunity to review the performance for AMP's third quarter.
The third quarter showed solid momentum across the group with the Australian wealth management division recording net cashflows (excluding the closure of Genesys Wealth advisers) of $531 million; assets under management remained impressive at $111 billion; retail net cashflows into AMP platforms were $707 million; while AMP Capital experienced net cashflows of $1.1 billion.
2. Wealth protection business under control
Some investors will remember that back in 2013 AMP was under pressure from an increase in claims within its wealth protection business. The claims experience losses led to a sell down in AMP's shares however the problems association with this division appear to be now under control. Commenting on the division's performance during the third quarter, management noted that despite losses relating to the retail income protection book, there had been no need to revise best estimate claims assumptions.
3. Attractive pricing
Based on consensus data provided by Morningstar, AMP is forecast to grow earnings per share (EPS) in the current 2015 financial year (FY) to 38.5 cents per share (cps) and increase the dividend to 28.5 cps. Importantly, further growth in EPS and the dividend are expected in FY 2016.
With the stock trading at $5.80 this implies a 2015 price-to-earnings ratio of 15x and a dividend yield of 4.9%. These metrics looks appealing compared with other major blue-chip stocks.
