Is the Insurance Australia Group (ASX:IAG) share price a buy for its fully franked dividend?

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ASX:IAG

The Insurance Australia Group (ASX:IAG) share price has gained 24 per cent over the past 12 months, making it one of the top ASX 20 performers over that period.

IAG shares currently trade at $7.94, only a little below its 52-week high of $8.43.

IAG is a leading insurance player with a scale advantage in Australia and New Zealand. It is targeting a high dividend and around 10 per cent compound earnings growth through the cycle.

IAG’s brands include CGU and NRMA.

In February, on nearly 4 per cent like for like gross written premium growth, IAG reported a 23.5 per cent jump in net profit after tax. The company upgraded its reported margin guidance to 15.5 to 17.5 per cent.

The IAG interim fully franked dividend was 14 cents, an increase of 7.7 per cent over the previous year.

Source: Company presentation 

In March, Citi retained a neutral rating for Insurance Australia Group, but still ranks the stock highly although acknowledging its share price was sitting a tad high. The IAG share price is flat since then.

On a trailing basis, IAG shares trade on a fully franked dividend yield of 4.3 per cent, or 6.1 per cent when grossed up for franking credits.

The IAG dividend yield is relatively attractive, especially given interest rates are likely to remain at these current low levels well into 2019.

By comparison, the Suncorp Group (ASX:SUN) share price trades on a fully franked dividend yield of 5.3 per cent. Suncorp shares are currently trading at $13.87, down 4.1 per cent in the last 12 months. 

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au