This week's top dividend buy for me is Macquarie Group Ltd (ASX: MQG). It is a global provider of banking, financial advisory, investment and fund management services thereby making its sources of earnings more diverse than the big four banks Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX:NAB).
Here are some of its key metrics:
- Dividend yield. Macquarie Group has a 45% franked dividend yield of 4.9% compared to a market average of 3.9% and a sector average of 3.7%. The dividend is 45% franked as a significant portion of Macquarie's income is earned and taxed overseas.
- Dividend payout ratio. Macquarie Group has a dividend payout ratio of 73% i.e. 73% of its FY 2017 profits were paid out as a dividend. This suggests that its dividend amount is fairly sustainable and can be maintained should earnings drop slightly.
- Dividend growth rate. Macquarie Group has an average 5-year dividend growth rate of 27.8% and a 10-year average dividend growth rate of 3.7% which is good for long term investors.
- Dividend stability. Macquarie Group has a dividend stability of 95.3% compared to a sector average of 92%. Its earnings stability rate of 50.5% is however slightly lower than the sector average of 52.2%. This is because its capital markets business is highly volatile and sensitive to market conditions. The funds management business which is far more stable has increasingly become a bigger portion of Macquarie's earnings.
- Gearing: Macquarie is highly geared and has a debt to equity ratio of 675% which is not unusual for its industry.
- Valuation. Macquarie Group has a lower PE ratio of 15 (compared to a sector average of 16 and a market average of 17). Its price to book ratio however of 2.04 is higher that the sector average of 1.08 and a market average of 1.59).
Overall Macquarie Group is a solid dividend stock, that will likely do well over the long run. If dividends aren't for you and you are looking for some fast growing innovative companies, try these disruptors.
