Recent Buy PRU

16 Jun 2018 12:38
Tags pru prudential

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Friday I made an initial investment in Prudential Financial (PRU) at a price of $97.41 per share and a dividend yield of 3.69%.

At the start of the month I had targeted four potential stocks to buy this month, though I only had funds for one, Leggett & Platt (LEG), Pepsico (PEP), IBM and Prudential (PRU). By the time I had funds available to make a purchase LEG & PEP climbed 5% and IBM climbed 3% in equity price while PRU dropped 1%. This was not that hard of a decision at this point so I capitalized on the weakness of a price decline and settled on PRU.

PRU has 10 straight years of dividend growth with its most recent increase of 20% announced back in February 2018. The recent dividend increase places their payout ratio at a low 32% of earnings. While the payout ratio allows for dividend growth it is not the primary feature that I like about PRU (but it does help). There are two aspects of PRU I find more attractive for long term potential of continued dividend growth; increasing rates and global aging populations.

The Federal Reserve just increased rates again and announced their stance on future rate increases. For the insurance side of the business this is good news. Insurance companies keep a significant amount of cash and short term investments on hand for claims and risk reduction, with increased rates this will increase the interest earned on those funds. Subsequently, the European Central Bank just announced an end to their Quantitative Easing (QE) program and while they have no immediate plans to increase rates I am assuming they will begin gradually increasing rates 12-18 months after the end of the QE. So globally we will see rising rates and better interest returns for short term investments.

The largest attraction of PRU I saved for last. The United States is not the only country facing an aging population issue and it is becoming a global issue. The map below is forecasted population growth by 2030 where 20% of the population will be 65 or older. The good news for PRU is that they are positioned in all of the major markets with the exception of Oceania countries like Australia and New Zealand. PRU global foot print include the America’s, Europe and Asia. It is no coincidence that their three main services of life insurance, retirement solutions and investment management services are all targeted to an aging population positioning them to capitalize on the global aging phenomenon. Considering there are forecasts that the aging crisis will peak in 2050 to 2055 before declining PRU has the potential to grow dividends for another 30 years.

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source http://money.cnn.com/interactive/news/aging-countries/index.html

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