Why the IOOF share price is jumping higher today

The IOOF Holdings Limited (ASX: IFL) share price is among the best performing stocks on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index today after at least two brokers upgraded the stock.

| More on:
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

The IOOF Holdings Limited (ASX: IFL) share price is among the best performing stocks on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index today after at least two brokers upgraded the stock.

The IOOF share price rallied 3.5% to a near one-year high of $7.30 ahead of the market close – making it the third best performer on the ASX 200.

In case you are wondering, the Bravura Solutions Ltd (ASX: BVS) share price is in the top spot with a 6.8% surge to $4.02 and Southern Cross Media Group Ltd (ASX: SXL) share price is in second place with a 3.7% run to $0.90.

Is IOOF finally in the "buy" zone?

Sentiment towards IOOF is turning after a torrid year with the Hayne Royal Commission and a court case by APRA sapping confidence towards the stock. Credit Suisse upgraded the stock to "outperform" from "neutral" following Australia and New Zealand Banking Group's (ASX: ANZ) decision to sell its wealth (P&I) business to IOOF at a $125 million discount to the original price.

Further, APRA decision not to appeal the Federal Court of Australia's ruling in relation to two of IOOF's businesses and certain directors and executives is another win for the wealth manager.

"We increase our target price to A$8.45 (from A$5.05), moving to our 'ANZ deal goes ahead' valuation," said the broker.

"While the acquisition still requires APRA approval, we consider the two announcements today as significant progress from the position a day prior."

Second upgrade

Citigroup also lifted its valuation on IOOF significantly and upgraded its recommendation on the stock to "Hold/High Risk" from "Sell/High Risk".

"With the ANZ P&I deal seemingly now having a strong likelihood of proceeding, we materially lift EPS [earnings per share] FY20E: +29%; FY21E: +46%; FY22E: +41%," said Citi.

"While IOOF still faces major hurdles such as the need to restructure its advice business economics and a doubling up of the business skew to platforms competition, we believe the added scale and associated cost synergies from the ANZ P&I deal should provide some earnings flexibility over the next three years."

The broker doesn't think APRA will stand in the way of the deal and had upped its price target on IOOF to $7.30 from $4.40 per share.

While the valuation on the stock got a big boost, Citi is forecasting a big cut to IOOF's dividend for this financial year as management will require more capital for its new advice business model. IOOF can't quantify the amount and investors will likely have to wait till early December for an update.

Citi is forecasting a dividend of 30 cents a share for FY20 compared to the 44.5 cents a share that IOOF paid in FY19.

If you are looking for better dividend stocks, you will want to get your hands on this free report from the experts at the Motley Fool.

Follow the free link below to find out what these dividend favourites are.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited. Connect with him on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. 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.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »