If I had to choose just one FTSE 100 stock to invest £2,000, or any other amount, in today, it would have to be global financial services group Prudential (LSE: LON:PRU).
While this company might face further uncertainty in the short term, over the long run it should benefit from several economic tailwinds. These may help it produce impressive total returns for shareholders.
FTSE 100 stock to buy today There are several reasons why I’d choose this company over any other blue-chip. For a start, the FTSE 100 business has an enormous runway for growth ahead of it.
After spinning off its UK-focused asset management division last year, Prudential is now primarily an Asia-focused financial firm. It also has a US division. But management is looking at getting rid of this business shortly. When it does, the company will be purely focused on the rapidly-growing Asian financial services market.
Figures suggest the Asian life insurance market will grow at a high digit annual percentage for the foreseeable future. The region’s growing population, coupled with an expanding middle class, will be the key drivers behind this growth.
Another reason why I like Prudential is its international diversification. Many FTSE 100 companies have international businesses. However, Prudential now earns the majority of its income in markets such as Hong Kong, China, and other south Asian countries. This gives investors a great way to gain exposure to these regions. At the same time, investors can diversify away from domestic risks, such as Brexit.
Cash return policy The company’s cash returns policy is the third reason why I think this FTSE 100 growth champion is worth buying today.
This year, many of Prudential’s FTSE 100 peers have suspended their dividends to conserve cash in the coronavirus crisis. However, due to the long-term recurring nature of Prudential’s business model, the company has been able to sustain its dividend to investors.
Consumers usually pay monthly for life insurance policies, which gives the company a stable and predictable recurring revenue stream. Management can either reinvest this cash or return a percentage to shareholders. It’s been doing both over the past few decades.
At the time of writing, shares in the life insurance and asset management giant support a dividend yield of 2.7%. The distribution is covered more than four earnings per share. This suggests that even if earnings fall 50%, the company could still afford to return cash to investors.
Undervalued Despite the FTSE 100 firm’s attractive qualities, its shares are trading down around 20% year-to-date. As such, now could be an excellent time for investors to snap up some shares in this global growth giant, as part of a well-diversified portfolio, while they appear to offer a wide margin of safety.
Doing so could provide substantial total returns over the long run as the company capitalises on its dominant position in Asian financial markets.
The post £2k to invest? I think this is the best FTSE 100 stock to buy now appeared first on The Motley Fool UK.
Rupert Hargreaves owns shares in Prudential. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
