While the present time is a somewhat worrying one for Aussie investors, it also presents a superb opportunity. Certainly, the ASX may continue to fall as it has done for most of this year and, looking ahead, it would not be a major surprise for the economy to move into recession. But, for long-term investors, right now is a great opportunity to buy high-quality companies at depressed prices.
For example, Suncorp Group Ltd (ASX: SUN) has recorded a 10% fall in its share price since the turn of the year. The diversified financial company, though, is performing extremely well as a business. It posted a rise in its bottom line of 53% in its most recent financial year and, looking ahead, is forecast to record further gains of 15% and 5% respectively during the next two years.
In addition, Suncorp currently yields a fully franked 6.6%, which is much higher than the ASX's yield of 4.8%. Importantly, Suncorp's dividend coverage ratio is set to expand to 1.2 in the next financial year, which indicates that its shareholder payouts are very sustainable. And, with it trading on a price to earnings (P/E) ratio of just 13.9 versus 15.1 for the ASX and 16 for the wider insurance sector, upward rerating prospects seem to be relatively high.
Similarly, National Australia Bank Ltd. (ASX: NAB) has lost value in recent months, with its shares being down 7% since June. This puts them on a price to book value (P/B) ratio of just 1.66 and a P/E ratio of only 12.8. And, with earnings forecast to rise by 12% per annum during the next two years, an upward rerating could easily be justified.
Furthermore, with it set to offload troublesome foreign assets, such as Clydesdale in the UK, NAB's long term future appears to be bright. This is further evidenced by the recent $5bn capital raising which puts NAB on a more sound financial footing and means that the bank's 6.4% yield (fully franked) is sustainable given that shareholder payouts make up a modest 75% of profit.
Meanwhile, Australia and New Zealand Banking Group (ASX: ANZ) may have found trading conditions tough in its most recent quarter, but its super regional strategy looks set to enable it to deliver improved earnings growth over the medium to long term. So, while its earnings are set to flat line in the next two years, ANZ's P/E ratio of just 10.8 holds great appeal for long-term investors while the wider banking sector trades on a P/E ratio of 12.7.
Furthermore, ANZ continues to have a very enticing yield of 6.4% (fully franked) and, with dividends due to rise by almost 2% per annum during the next two years, it seems likely that the bank will offer inflation-beating dividend growth even if profit does disappoint. And, with a payout ratio of 69%, there appears to be scope to continue to raise shareholder payouts over the medium term.
