Suncorp Group Ltd (ASX: SUN) is hitting new highs on the back of a successful full year result. As the insurance industry in general is showing improvement, investors pushed the company's stock to $15.13 last week. In the past three months, it's up about 12.3% compared to the 1.6% gain of the S&P/ASX 200 Index (Index: ^XJO) (ASX: XJO).
Here are three reasons why the insurer and banker is riding high right now and what could drive it further over the next few years.
— Strong earnings recovery
Suncorp posted a $730 million net profit for FY 2014, up from $491 million in the previous year. The big winners were the general insurance division and banking business. Banking consolidated its operations, which improved results. It also saw a rise in home lending brought on by lower interest rates creating more home buyers.
Life insurance showed some improvement with an increased net profit before policy adjustments to $92 million, yet that turned into a loss with policy adjustments of negative $176 million, leaving an $84 million net loss after tax. Investors should note that the life insurance division only contributes about 7% of the group's net profits, so gains in general insurance and banking easily offset the poor life insurance performance.
— Simplification program savings for 2015, 2016
The company's restructuring to streamline the business should generate cost savings of around $225 million in FY 2015 and a total of $265 million in FY 2016. These savings can be used to make Suncorp's products more cost effective versus competitors.
— Dividend increases
Dividend income is particularly attractive for investors , especially since Suncorp announced its final dividend rose 10 cents to 40 cents per share. In addition, as was expected the company declared a special dividend of 30 cps. On top of an increased interim dividend, the full year dividend comes out to $1.05 a share, 40% higher than in FY 2013! The dividend yield is a fantastic 6.0% fully franked.
For investors and current shareholders who want to receive the final and special dividend, please remember the following dates to make sure you get them:
Ex-dividend date: Wednesday 20 August, 2014
Record date: Friday 22 August, 2014
Payment date: Wednesday 1 October, 2014
