Had enough of the big 4 banks? Try these stocks instead

Financials is a good industry, these 4 stocks could be great additions to your portfolio.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A lot of Australian portfolios have holdings which are dominated by the big four banks Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).

Investors may also have investments in Bendigo and Adelaide Bank Ltd (ASX: BEN), Bank of Queensland Limited (ASX: BOQ) and Suncorp Group Ltd (ASX: SUN).

Most portfolios' financial industry exposure is probably from a domestic bank. It might be a wise move to diversify your financial exposure with the following four international options:

Macquarie Group Ltd (ASX: MQG)

Macquarie generates a majority of its earnings from overseas, but it still does have a significant presence in Australia.

The business has diversified its earnings to include less cyclical activities that it describes as "annuity-like", including aircraft leasing.

Macquarie is trading at 13x FY18's estimated earnings with a partially franked dividend yield of 5.34%.

CYBG PLC CDI 1:1 (ASX: CYB)

CYBG used to be part of National Australia Bank, but now it's a separate entity. It is the entity responsible for the Clydesdale Bank and the Yorkshire Bank in the UK.

The UK economy and banking system offers a different set of opportunities and risks to the Australian version. If you believe the UK economy is going to do well over the next few years then this could be the way to gain exposure.

CYBG is trading at 14x FY17's estimated earnings and doesn't yet pay a dividend.

Pepper Group Ltd (ASX: PEP)

Pepper is one of Australia's largest non-bank lenders and financial groups. It has a presence in Australia, Ireland, the UK, Spain, South Korea and China.

It is rapidly expanding its business having gone from $304.3 million total income in 2015 to $413.2 million total income in 2016.

Pepper is currently trading at 14x FY17's estimated earnings with a grossed-up dividend yield of 3.47%. It has a very low dividend payout ratio of 24%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan Financial Group has been the stellar ASX-listed fund manager that focuses on international investments.

It has been very successful at growing funds under management and outperforming the market, which is why its share price has grown by 31% over the past year. It could continue to grow in popularity as investors look overseas for diversification and higher performance.

Magellan Financial Group is currently trading at 25x FY17's estimated earnings with a grossed-up dividend yield of 3.75%.

Foolish takeaway

I think all four of the above businesses are interesting options. At the current prices, I think Magellan Financial Group would be my preferred pick.

Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »