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The FTSE 100 is on a roll proper now. At round 7,900 factors, the UK’s premier share index is inside a whisker of hitting new highs. And as market confidence steadily builds, a barge by way of this stage appears to be like inevitable.
But regardless of this energy, the Footsie continues to be jam-packed with sensible bargains. Monetary companies large Phoenix Group Holdings (LSE:PHNX) is one blue-chip share that I believe nonetheless presents enticing worth regardless of current positive aspects. Let me present you why.
Earnings
The primary port of name is to contemplate Phoenix’s share worth relative to forecast earnings. At 539p per share, it trades on a ahead price-to-earnings (P/E) ratio of 11.5 occasions, which is simply above the FTSE 100 common of 10.5 occasions.
It’s additionally price contemplating the corporate’s worth in contrast with different corporations within the financial savings, wealth, and pensions area. Because the chart under exhibits, its P/E ratio is under these of (in descending order) Zurich Insurance coverage Group, Aviva, and Authorized & Basic Group.
It’s marginally dearer on this foundation than M&G, nevertheless. So, on steadiness the enterprise presents strong (if not excellent) worth, for my part.
Dividends
The ahead dividend yield is one other important measure of how low cost a share is. This represents dividend revenue as a proportion of the present share worth.
On this metric, Phoenix Group’s shares might be thought of fairly excellent. At 10%, the yield right here soars above the three.7% common for FTSE shares.
Moreover, because the desk under signifies, Phoenix additionally comfortably beats all of its rivals (bar M&G) on this metric.
| Inventory | Ahead dividend yield |
|---|---|
| Aviva | 7% |
| Authorized & Basic | 8.4% |
| M&G | 10.5% |
| Zurich | 5.9% |
Property
The very last thing to contemplate is how Phoenix’s share worth stacks up relative to the worth of the agency’s property. A preferred means to do that is to calculate its price-to-book (P/B) ratio, which divides the agency’s complete guide worth (property minus liabilities) by the entire variety of excellent shares.
With a studying of round 2.2, the enterprise trades at a good premium to the worth of its property. As an investor I’d be on the lookout for a studying round or under one.
Whereas disappointing, Phoenix isn’t the monetary companies business’s costliest operator based mostly on the P/B ratio. Because the chart exhibits, Authorized & Basic and Zurich carry readings above three. However Phoenix’s a number of is greater than these of Aviva and M&G.
Ought to I purchase Phoenix shares?
Based mostly on these charts, M&G is fingers down the perfect worth inventory throughout this grouping, in addition to in contrast with the broader FTSE 100.
However what about Phoenix? Effectively the charts point out to me that Phoenix shares nonetheless supply strong for worth. Certainly, they may very well be particularly enticing for buyers in search of passive revenue due to that giant dividend yield that’s supported by a strong steadiness sheet (its Solvency II surplus got here in at £3.9bn in 2023).
The monetary companies business might endure additional turbulence if the rates of interest stay elevated. However the longer-term outlook right here stays strong, with quickly ageing populations tipped to supercharge demand for wealth and pension merchandise.
I believe Phoenix — which is the UK’s largest financial savings and retirement enterprise — may very well be a good way to generate dividend revenue within the coming a long time. And at present costs I’m contemplating opening a place.
