There's a lot to like about Australia's largest investment bank, Macquarie Group Ltd (ASX: MQG).
Aside from the fact its share price has almost doubled in the past three years and an additional 25% has been paid out in dividends, investors may have even more to smile about in the near future.
Here are three reasons why Macquarie Group shares deserve a spot on your watchlist.
Dividends
As I noted here Macquarie's annual dividend payouts can be volatile throughout the market cycle. However it is currently forecast to continue raising its distributions over coming years.
Based on Morningstar's analyst consensus estimates, its shares will pay a dividend equivalent to a yield of 4.6% in financial year 2016.
U.S. Exposure
Although the Australian economy is expected to slow in coming years, the U.S. market is being tipped to power ahead. For Macquarie this means more business from confident investors and an added bonus from a stronger U.S. currency. Approximately 32% of group revenue is currently derived from the U.S. market alone.
Rising Stocks Markets
Macquarie, an intermediary between businesses, individuals and financial markets, benefits immensely from rising stock markets. Higher returns from stock markets leads to increased trading volumes and large net inflows. Ultimately this boosts base management fees and performance fees. In 2015, Macquarie's fee and commission income jumped 23.8% year over year.
Should you buy Macquarie Group shares today?
Personally, as a long-term investor, I'm being patient and waiting for a lower entry point before starting a new position in Macquarie.
Similar to the way Macquarie is leveraged to rising markets, it is also leveraged to the downside. The same holds true for shares of fund managers such as Platinum Asset Management Limited (ASX: PTM) and BT Investment Management Ltd (ASX: BTT).
The challenge for investors is to purchase Macquarie shares at a compelling price based on average profits throughout the market cycle.
