The ASX financial share Macquarie Group Ltd (ASX: MQG) has declined 8% since 7 March 2023. It's currently under $180 per share.
It's unsurprising that the investment bank has suffered a fall during this short amount of time considering all of the pain relating to the global banking sector over the past month.
First, there was the collapse of venture-tech-focused bank Silicon Valley Bank (SVB) which suffered from massive withdrawals of customer deposits, leading to the bank selling bonds at a loss. Then Credit Suisse had to be taken over by UBS.
But, a key question is whether the business will be able to generate pleasing returns from here. No one can say what the future shareholder returns are going to be, but I'm going to outline why the ASX financial share can perform for investors from here.
Dividends
I think that capital growth will generate the majority of the returns for shareholders because I expect that Macquarie will be able to generate long-term earnings growth. This will help push the Macquarie share price higher.
But, the dividends from Macquarie can help some of the returns and provide cash benefits during this period of volatility.
Excluding the effects of franking credits, over the last 12 months, Macquarie has paid dividends totalling $6.50 which is a dividend yield of 3.7%.
That dividend is expected to grow in the coming years.
In FY24 the dividend is expected to rise to $6.80 per share and then in FY25, the annual dividend per share could rise to $7.20 per share, according to Commsec.
In other words, by FY25, Macquarie could be paying an annual dividend share of 4.1%. I think that the dividend can continue to rise from here.
Long-term earnings growth
One of the biggest advantages of Macquarie compared to a bank like Commonwealth Bank of Australia (ASX: CBA) is its global earnings base.
The domestically focused ASX banks generate (almost) all of their earnings from Australia and New Zealand, largely from lending.
Macquarie has a very diversified group of businesses. It does have a rapidly growing Australian banking division.
But, it also has a large asset management business, Macquarie has investment banking operations and also a commodities and global markets (CGM) business.
I think Macquarie has proven to be very effective at investing in the right places to help it grow. With its global operations, Macquarie is able to invest wherever makes the most sense for its capital.
The ASX financial share is putting money into green energy, green financing and other energy transition areas, which is a very large growth area.
Macquarie says it's well-capitalised and conservatively positioned to handle whatever comes next. I think this can enable the business to outperform its ASX bank share peers.
Foolish takeaway
While the next 12 months could be uncertain for Macquarie's earnings, Commsec numbers suggest that earnings per share (EPS) could rise to $13.20 in FY25. This would put the current Macquarie share price at 13 times FY25's estimated earnings.
I think Macquarie shares can outperform the S&P/ASX 200 Index (ASX: XJO) over the longer term. However, with how large the business is, I wouldn't expect it to achieve massive returns – so I think I'd go for other candidates to try to build a lot of wealth.
