Investors can be a tough crowd to please.
Just ask insurance and banking group Suncorp Group Ltd (ASX: SUN), which saw shares dumped as much as 3.4% this morning despite announcing a 15% lift in group Net Profit After Tax (NPAT) for the half-year to 31December, 2014 (HY14). Expectations were clearly high, so what do the results mean for investors?
Well, for starters it means an extra $83 million in net profit!
It was an impressive result driven by two of Suncorp's three divisions; Suncorp Bank, which grew NPAT by 67.6% to $176 million, and Life, which grew by over 200% to $86 million.
The improvement by Suncorp Bank was credited to lower impairment charges and improved net interest margins, (the difference between the rate the bank borrows and lends at), while the jump in profit for Life was the result of lower interest rates, favourable claims figures and policy lapses.
One sore spot for Suncorp Group was the 10.9% fall in General insurance net profit after tax, which was dragged down by $250 million of net claims from the Brisbane Hailstorm in November 2014.
Show me the dividends!
For investors, the extra cash means a bigger dividend cheque coming their way. Suncorp upped its interim dividend by 3 cents to 38 cents per share (cps), pushing the annual dividend yield up to 5.5% (based on 2014's final dividend of 40 cps, but excluding the additional 30cps special dividend paid in 2014).
The dividend represents a pay-out ratio of 73.6% of cash earnings and the stock will go ex-dividend on 18 February.
So why did shares fall?
Going forward Suncorp announced it expects to produce a "stable, consistent and reliable" profit, driven by diversified earnings and cost reductions. However the company expects competition and low interest rates to slow growth to "low single digits" for the 2015 financial year, disappointing shareholders and resulting in a sell-down in share price.
