Shares in Australia and New Zealand Banking Group (ASX: ANZ) have largely tracked the performance of the ASX during the course of 2014. Indeed, ANZ is up 4% since the turn of the year, while the ASX has been able to post gains of 5% during the same time period. However, the future could be a lot brighter for ANZ and shares in the bank could be worth buying for these four reasons:
- Earnings growth over the next two financial years is set to be very impressive. Indeed, ANZ is forecast to increase EPS from $2.16 last year to $2.53 in the current financial year, which is an increase of 17.1%. Furthermore, the following year is set to see further growth, with EPS due to reach $2.65. This would represent a year-on-year growth rate of 4.7% and, over the two years, would work out at an annualised growth rate of 10.7%.
- As well as growth potential, ANZ offers investors a fat, fully franked yield of 5.1%. This could help to boost incomes at a time when interest rates look set to remain low for a good while longer.
- If a 5.1% yield isn't enough, strong earnings growth looks set to be passed on to shareholders via increased dividends per share. For example, dividends per share are forecast to increase at a rate of 6.2% over the next couple of financial years. Meanwhile, the bank's dividend coverage ratio of 1.3 indicates that dividends are relatively sustainable moving forward.
- As well as strong growth and income prospects, ANZ also offers value for money at current price levels. For instance, it trades on a P/E ratio of just 13.4 and, when this is combined with its previously mentioned EPS growth rates, equates to a price to earnings growth (PEG) ratio of just 1.26. Both of these figures are well below the ASX's P/E of 16.2 and PEG of 1.83, which highlights the attractive valuation of ANZ shares.
