Macquarie Group Ltd (ASX: MQG) shares have been on a tear over the past three years, rising an incredible 187% since June 2012. Obviously, as Australia's leading investment bank, Macquarie is going to do well when global sharemarkets and confidence are on the rise as has been the case over the past three years.
However, with an average analyst price target of $85.02 according to The Wall Street Journal, there could be a number of reasons why Macquarie Group shares still deserve a spot on your watchlist.
Here are three of my favourite:
- In the 2015 financial year, 70% of Macquarie's income was generated overseas. Given many financial commentators believe our currency is overvalued, any further depreciation in the Australian dollar will bolster the bank's profits.
- Macquarie's 'annuity-style' businesses now account for 69% of income. Following a big fallout in the wake of the global financial crisis, Macquarie's management sought to diversify the business into less cyclical areas of finance which it calls, "annuity style" businesses. These include things such as funds management, leasing, and banking and financial services.
- Dividend increases are also likely to be a key feature from Macquarie Group shares over coming years. Currently, analysts are forecasting the bank to pay $3.59 in dividends throughout financial year 2016, placing its shares on a forecast yield of 4.3% with partial franking.
Macquarie Group is a cyclical stock which will continue to rally as the Australian dollar drops and global share markets rise. However, it's important to regularly remind ourselves that the cycle works in both directions!
