Challenger Limited (CGF) is an investment management firm focusing on providing Australians with financial security in retirement. Challenger operates two core investment businesses, Life division, and Funds Management division. As of 31 December 2014 Total Assets Under Management were $57.2bn an increase of 12.7% compared to pcp.
Strong retail sales in its annuities and growing funds under management (FUM) reflect CGF’s strong development in building a leading retirement income platform. CGF’s 52 week high is at $8.20 and its 52 week low is $5.80. The stock has retreated nearly 30% between July and December 2014 during volatile market conditions and as statutory net profit decreased 21.8% compared to pcp mainly due to tax expenses. However, the company has increased its revenue flow by 9.6% and experienced modest growth across most divisions. The board announced an interim dividend of 14.5 which is an increase of 16%. The shares will trade ex-dividend on 2nd March 2015 payable on 31st March 2015. The dividend is 70% franked (2013: unfranked) and Challenger expects its final dividend to be 100% franked and in the range of 45% to 50% of normalised net profit.
We are attracted to CGF’s income profile, healthy funding position, and good dividend yield. We believe the company is well-positioned to deliver long-term shareholder value and we initiate coverage with a ‘buy’ recommendation.
Please note: The recommendations of the ‘Dividend Portfolio’ have a medium to long-term outlook.
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