The Suncorp Group Ltd (ASX: SUN) is set to pay its $0.08 per share dividend today – so is the Aussie insurer in the buy basket at $13.74 per share?
How has Suncorp performed so far this year?
The Suncorp share price is up 11% year-to-date as one of the better performers within the S&P/ASX200 Financials Index (ASX: XFJ). The company's share price fell 2% in the last 6 months as its profitability was impacted by extraordinary events including the Townsville floods and Sydney hailstorm.
Overall, Suncorp emerged relatively unscathed from the 2018 Financial Services Royal Commission with no structural changes that will affect Suncorp's business going forward.
The stock is currently trading at a P/E multiple of 21x earnings which I think is a little on the expensive side albeit in line with insurance peers Insurance Australia Group Ltd (ASX: IAG) and Medibank Private Ltd (ASX: MPL) which trade at 19.7x and 18.7x respectively.
The Aussie insurers have been generally solid throughout this year, particularly when compared to the banks, and those looking for regional exposure would be better off buying Suncorp ahead of the likes of Bendigo and Adelaide Bank Ltd (ASX: BEN) or Bank of Queensland Ltd (ASX: BOQ) in my view.
Should you buy Suncorp shares?
Despite the good outcome for Aussie insurers from the Royal Commission, perhaps with mortgage insurance brokers such as Genworth Mortgage Insurance Australia (ASX: GMA) excepted, I still see some headwinds going forward.
The seemingly increasing regularity of these "extraordinary" natural weather events could present some challenges for measuring Suncorp's profitability going forward.
With the banks restricting lending growth there's a chance that Suncorp could also see it's home insurance opportunities dry up as the housing market continues to correct.
I'm personally not bullish on the Financials sector in 2019 but there could be some opportunities to pick up banking and insurance shares on the cheap given the correction we saw last year.
For value investors, Suncorp currently offers a 5.3% p.a. dividend yield which is certainly in the upper ranges of its S&P/ASX200 Index (ASX: XJO) although below the 6% – 8% offered by the Big 4 banks.
For those who are looking for more capital gains than income in 2019, I'd be looking at this top-rated stock in a $22 billion (and growing) industry that could be in the buy basket.
