What this top broker is saying about IAG shares

IAG shares are trading close to their four-year highs.

| More on:
Two smiling work colleagues discuss an investment or business plan at their office.

Image source: Getty Images

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

Insurance Australia Group Ltd (ASX: IAG) shares are up 2.77% to $6.50 apiece on Thursday.

The ASX insurance stock is trading just a few cents off its four-year high of $6.54 set on 10 April.

There is no official news from Australia's biggest general insurer today.

IAG shares are likely riding higher because the whole market is up. In earlier trading, the S&P/ASX 200 Index (ASX: XJO) leapt to an intraday high of 7,891.5 points, up 1.78%.

The ASX 200 is rising following a strong night on Wall Street with the S&P 500 hitting a new closing high.

This was on the back of encouraging new US inflation data which has renewed hopes of an earlier interest rate cut from the US Federal Reserve.

IAG shares better than Suncorp

As reported in The Australian today, Citi analyst Nigel Pittaway prefers IAG shares to fellow insurance stock Suncorp Group Ltd (ASX: SUN), but only just.

In a note to investors, Pittaway said:

The winner in our head-to-head analysis is IAG, although the winning margin is slight.

The broker explained that both ASX insurance stocks had positive short-term prospects, including strong top-line growth and the likelihood of expanding margins.

He said:

In our view, both have strong earnings momentum and we expect the market to continue to buy this for now, even as valuation concerns become more paramount.

Pittaway noted that Suncorp had the best premium growth in Australia, the best capital return, and likely the better dividend potential of the two.

He commented that IAG had an opportunity to cut costs, and currently offered relatively better market value than Suncorp shares.

Citi has a 12-month share price target of $6.75 on IAG, implying a potential 3.7% upside.

The consensus among 14 analysts on CommSec is that IAG shares are a moderate buy. Four say the stock is a strong buy, nine say it's a hold, and one says IAG shares are a moderate sell at today's share price.

Goldman Sachs has a neutral rating on IAG with a 12-month share price target of $6.30. This implies a potential 3.2% downside on the ASX insurance stock.

What's next for IAG?

My colleague Tristan recently discussed the earnings outlook for IAG through to 2026 based on a new note out of broker UBS.

As for dividends, the consensus forecast on CommSec is for IAG to pay 26 cents per share in 2024, 30 cents in 2025, and 32 cents in 2026.

That means dividend yields of 3.99%, 4.6% and 5.7%, respectively, plus some franking.

In 2023, the annual dividend had 30% franking, and this year's interim dividend had 40% franking.

More on Financial Shares

Woman and man calculating a dividend yield.
Financial Shares

Here is the dividend forecast to 2026 for AMP shares

AMP could be a viable source of dividends. But how much will it pay?

Read more »

Keyboard button with the word sell on it.
Financial Shares

Why Goldman Sachs just slapped a sell rating on this ASX 200 stock

This blue chip has been hit with a sell rating. But why?

Read more »

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Financial Shares

If you'd invested $10,000 in Netwealth shares at the start of the year, here's how much you'd have now

Would it have been a good idea to buy Netwealth shares on 2 January?

Read more »

Australian notes and coins symbolising dividends.
Financial Shares

Why is the Macquarie share price getting hammered on Monday?

Investors shouldn't be worried about today's big share price drop...

Read more »

Happy man holding Australian dollar notes, representing dividends.
Financial Shares

What could $10,000 invested in QBE shares be worth in 12 months?

Would it be a good idea to buy this insurance giant's shares? Let's find out.

Read more »

A man looking at his laptop and thinking.
Financial Shares

Here is the earnings forecast out to 2026 for IAG shares

A leading broker has revealed where it thinks profit is headed in the next few years.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Financial Shares

The QBE share price is marching higher on Friday. Here's why

ASX 200 investors are bidding up the QBE share price on Friday. But why?

Read more »

Two people shaking hands in the boardroom on a merger.
Mergers & Acquisitions

Under-the-radar ASX All Ords stock soars on confirmed takeover news

Investors are bidding up the ASX All Ords stock on takeover news.

Read more »