Is the Macquarie Group Ltd (ASX: MQG) share price a buy? It could be.
Macquarie could best be described as the largest Australian global investment bank. It truly is global. In the recent half-year result, around 31% of net income came from the Americas, 27% of net income came from Europe, the Middle East and Africa, 9% of net income came from Asia and 33% of net income came from Australia and New Zealand.
For the global diversification of earnings alone, I think it's a better investment choice than Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).
Macquarie can decide to focus growth in any region or country, whereas the Australian big banks are stuck mostly writing loans for Australian and New Zealand property.
Macquarie operates in a variety of finance sectors including asset management, asset finance, its own Australian mortgage book, investment activities and commodities trading. It's useful to have such a diverse earnings base.
I thought the Macquarie half-year result was solid with operating income growing by 8% compared to the prior corresponding period, earnings per share (EPS) increased by 5% and the dividend per share was increased by 5%.
Every bank on the ASX seems to offer a high dividend yield and Macquarie is no exception. It currently offers a partially franked dividend yield of 4.5%. Whilst the yield isn't as impressive as the major banks' yields, the Macquarie dividend is growing at a pleasing pace every year. Indeed, it has grown every year since the GFC. In the long run, growing income is better than stagnant income.
Foolish takeaway
Macquarie has proven to be a quality business over the past decade, we saw that with how most other financial institutions were hammered in the Royal Commission but Macquarie seemed to pass through unscathed.
Macquarie seems fairly good value at only 14x FY19's estimated earnings. The company has made a substantial effort to reduce the level of its earnings that could be described cyclical, however it would still take a valuation hit in another recession so I'd be tempted to just wait until the next downturn to buy shares.
