Should You Buy Prudential Plc Today?
Shares in Prudential (LSE: PRU) (NYSE: PRU.US) have experienced steady upward momentum since last summer, rising a superb 60% during the period and topping out at last month's record peak of 1,155p.
And I am firmly convinced that excellent growth prospects, allied to a hugely attractive dividend scheme, should keep the stock price moving skywards. Indeed, Investec hiked its target price to 1,144p following excellent 2012 results released last month.
Asian activity drives profits higher
The company recorded a 25% hike in operating profit last year to £2.5bn, with profit from Asia leaping 26% to £988m.
Remarkably, net cash remittance from its Asian operations came in at £341m, up a colossal 66% from 2011 and now the largest contributor to group cash remittance. Total net cash remittance rose 9%, in 2012, to £1.2bn.
The company's strategic switch to offer products which boast a shorter lead time to producing profit, a move which has enabled Prudential to drastically improve its shareholder payouts.
A cracking dividend selection
The company is considered by many a great income stock owing to its progressive dividend policy -- Prudential hiked its dividend 16% last year to just under 29.2p, taking out the previous record of 26p dating back to 2002.
Prudential's new strategy is really starting to throw up some serious cash, which could provide juicier payouts further down the line. Payouts of 30.9p and 33.1p have been pencilled in for 2013 and 2014 by forecasters, with yields of 2.9% and 3.1% for these years just below the 3.2% FTSE 100 average.
And these are also well protected, with coverage around 2.6 times for these years comfortably ahead of the generally regarded safety benchmark of 2.
Earnings growth ready to accelerate
City analysts expect earnings per share to rise 5% in 2013, to 80p, before punching double-digit growth of 11% next year, moving to 89p.
The Pru currently changes hands on a P/E rating of 13.2 for 2013 -- marginally above a forward earnings multiple of 12.9 for the broader life insurance sector -- and is predicted to fall to 12 next year. In my opinion this offers great value for income investors given Prudential's exciting dividend policy and plump growth prospects.
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