Is the Macquarie share price a buy?

Is the Macquarie Group Ltd (ASX: MQG) share price a buy?

Macquarie is Australia’s largest investment bank and it’s been something I’ve been considering for quite a while, sadly I first considered it (but didn’t buy) when it was below $65, which is much lower than today’s price! Its capital growth has been impressive over the past five years, rising by 133%.

The share prices of the other financial institutions of 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) are all lower than they were five years ago.

The strength of Macquarie is that it generates around two thirds of income from overseas sources. Not only has it avoided the scandals that were uncovered in the Royal Commission but it has benefited from the strength of the US market and the generally supportive conditions in its other operating areas like Europe of Asia.

With its fingers in so many different cyclical and non-cyclical pies like infrastructure management, capital finance and market activity, Macquarie can be a good performer at all points on the cycle.

If another GFC were to happen it would undoubtedly cause damage to Macquarie’s earnings, but not as much as a decade ago – its earnings are more ‘annuity style’ as the investment bank likes to call them. It expects its earnings to hold up better in the next recession.

Macquarie’s dividend has grown at an impressive pace every year since the GFC. I would much rather have growth of the earnings, the dividend and the share price over the medium-term than a share with a dividend that has a high yield but no growth for many years.

Foolish takeaway

Macquarie is expecting another year of double digit profit growth in FY19 and it’s currently trading at under 15x FY19’s estimated earnings with a partially franked dividend yield of 4%. I’d prefer to buy Macquarie at under $110 if possible, but Macquarie’s share price today is more attractive to me over the long-term than the big ASX banks.

These top ASX dividend shares could also be worth holding over the big ASX banks, and even Macquarie.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Macquarie Group 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 Scott Phillips.

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