The IOOF Holdings Limited (ASX: IFL) share price is among the best performing stocks on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index today after at least two brokers upgraded the stock.
The IOOF share price rallied 3.5% to a near one-year high of $7.30 ahead of the market close – making it the third best performer on the ASX 200.
In case you are wondering, the Bravura Solutions Ltd (ASX: BVS) share price is in the top spot with a 6.8% surge to $4.02 and Southern Cross Media Group Ltd (ASX: SXL) share price is in second place with a 3.7% run to $0.90.
Is IOOF finally in the “buy” zone?
Sentiment towards IOOF is turning after a torrid year with the Hayne Royal Commission and a court case by APRA sapping confidence towards the stock. Credit Suisse upgraded the stock to “outperform” from “neutral” following Australia and New Zealand Banking Group’s (ASX: ANZ) decision to sell its wealth (P&I) business to IOOF at a $125 million discount to the original price.
Further, APRA decision not to appeal the Federal Court of Australia’s ruling in relation to two of IOOF’s businesses and certain directors and executives is another win for the wealth manager.
“We increase our target price to A$8.45 (from A$5.05), moving to our ‘ANZ deal goes ahead’ valuation,” said the broker.
“While the acquisition still requires APRA approval, we consider the two announcements today as significant progress from the position a day prior.”
Citigroup also lifted its valuation on IOOF significantly and upgraded its recommendation on the stock to “Hold/High Risk” from “Sell/High Risk”.
“With the ANZ P&I deal seemingly now having a strong likelihood of proceeding, we materially lift EPS [earnings per share] FY20E: +29%; FY21E: +46%; FY22E: +41%,” said Citi.
“While IOOF still faces major hurdles such as the need to restructure its advice business economics and a doubling up of the business skew to platforms competition, we believe the added scale and associated cost synergies from the ANZ P&I deal should provide some earnings flexibility over the next three years.”
The broker doesn’t think APRA will stand in the way of the deal and had upped its price target on IOOF to $7.30 from $4.40 per share.
While the valuation on the stock got a big boost, Citi is forecasting a big cut to IOOF’s dividend for this financial year as management will require more capital for its new advice business model. IOOF can’t quantify the amount and investors will likely have to wait till early December for an update.
Citi is forecasting a dividend of 30 cents a share for FY20 compared to the 44.5 cents a share that IOOF paid in FY19.
If you are looking for better dividend stocks, you will want to get your hands on this free report from the experts at the Motley Fool.
Follow the free link below to find out what these dividend favourites are.
The post Why the IOOF share price is jumping higher today appeared first on Motley Fool Australia.
When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.
In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.
Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.
- Man bets $221,666 on one ASX stock
- Top analysts name their top 3 ASX blue chip shares for 2019
- 3 quality dividend shares to boost your income
- NEW: Free report names top 3 ASX dividend shares to buy for 2019
- 5 Stocks for Potentially Building Wealth After 50
The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019