In another article we discussed the importance to identify trends in the Silver Economy and today I wanted to share with you an interesting investment idea using this rationale by analysing the Prudential Financial Inc. (PRU) shares.
PRU, is an American large cap company with offices worldwide which provides life insurance, annuities, pensions and retirement services. The company has a history which goes back over 140 years!
The firm is so proud of its strength, that it uses the rock of Gibraltar as its corporate logo to showcase its financial stability and strength.
During the financial crises the company managed to avoid taking bailout, something that few of its competitors could manage. Not only did it avoid the bailout, but Prudential Financial was also able to quickly restore its dividend to pre-financial crisis levels. After the dividend was cut in 2008, it quickly recovered by 2010 and it has increased regularly ever since. Today it pays a dividend of around 3.6%.
Interestingly, the dividend payout ratio is just 19% of earnings and thus suggesting a high probability that the dividend will be maintaining growth over time.
At the moment the company is continuing to achieve healthy profits and revenues each year. The company is also trading at good prices – the stock has a P/B of 0.92x and a P/E of 10. The firm also has a debt-to-equity ratio around 0.37 and a healthy free cash flow.
During the last earnings announcement, the company also reported the below key messages:
- Double-digit growth in adjusted earnings per share and adjusted book value per share
- Distributed ~$760 million to shareholders (on the rise in comparison to previous quarters)
- Adjusted operating return on equity of 13.5%
- Financial leverage ratio less than 25% (Financial leverage ratio represents capital debt divided by sum of capital debt and equity)
From a technical perspective, the price has just recently crossed over the 200 MA, which is considered as a very strong buy signal.
When considering the dividend, the attractive valuation, strong technical views and the continuing increase of ageing population, I think that this represents a good opportunity.
Past performance is not a guide to future results. This information is being provided solely for information purposes and should not be deemed or construed as investment advice, advice concerning particular investments, advice concerning investment decisions, tax or legal advice. Similarly, any views or opinions expressed are not intended and should not be construed as investment, tax and/or legal recommendations or advice. No person should act upon any opinion and/or information in this document without first obtaining professional advice.