3 financial companies to buy for international exposure

Credit: 401(K) 2012

Australia’s largest financial companies have been pretty unimpressive over the last two years, companies like Commonwealth Bank of Australia (ASX: CBA), Suncorp Group Ltd (ASX: SUN) and Bendigo and Adelaide Bank Ltd (ASX: BEN) haven’t grown much at all.

The Australian economy doesn’t look like it’s going to grow strongly any time soon. As our financial companies rely on growth in the economy to increase profits, it may be time to look further afield for growth.

Some Australian financial companies have expanded beyond these shores and those overseas markets may offer better growth in the next few years. Here are three financial companies to gain overseas exposure:

Macquarie Group Ltd (ASX: MQG)

Macquarie earns about 60% of its income from overseas, with a good presence in each continent. A much larger percentage of its income now comes from what Macquarie describes as ‘annuity-style businesses’. Macquarie is focusing its efforts on being an asset management business.

Macquarie just unveiled an 18.75% increase to its half year dividend for the six months to 30 September 2016. It’s trading at 13.2x FY17’s estimated earnings (source: Commsec) and has a partially franked yield of 5.4%. This could be a good time to pick up some Macquarie shares.

BT Investment Management Ltd (ASX: BTT)

BT is mostly an equities manager, with 68% of its funds under management (FUM) being in equities. Around half of its FUM is managed by its UK-based JO Hambro asset management business, this gives BT more diversification than a domestic manager like Perpetual Limited (ASX: PPT).

BT increased its most recent interim dividend by 6%. It has a fully franked dividend yield of 4.06% and is trading at 16.1x FY17’s estimated earnings. BT shares are trading 28% lower than their December 2015 high, partly due to the Brexit vote. At this price, it could be a good opportunity to buy.

Henderson Group plc (ASX: HGG)

Henderson is a fund manager based in the UK which, like BT, has been negatively affected by the recent Brexit vote. Henderson announced a few weeks ago that it plans to merge with US-based Janus Capital Group Inc to create an entity which would have total assets under management (AUM) of over US$320 billion.

This merger initially created a lot of excitement with the shares rising 11.5% the day after the announcement. However, the shares are now 2% lower than before the announcement. It’s hard to know how the new combined entity will perform, but the expected synergies and benefits should be fairly substantial.

Now could be a good time to buy before the merger.

Foolish takeaway

All three of these managers have been successful at growing their funds under management, profits and dividends in recent years. As most of Australia’s domestic-focused asset managers continue to be unimpressive, overseas ones could be the way to go.

I think all three should have reasonable long term performances, but I think Henderson looks the most compelling considering its share price reduction and how much benefit the potential merger could bring.

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Motley Fool contributor Tristan Harrison doesn’t own shares in any companies mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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