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Record Annuity Sales for Challenger Boost Dividend

Record Annuity Sales for Challenger Boost Dividend
Management declared a final dividend of 16.5 cents which brings the full year distribution to 32.5 cents, up 8 per cent.
Aug 16, 2016 By Simon Tags: CGF, Earnings

Challenger Limited (ASX:CGF) reported record annuity sales, up 22% on the previous year while Funds Under Management (FUM) rose to $55.1 billion, an increase of 11 per cent.

Management Lifts Dividend by 8 Per Cent

Total revenue for the full year was $1.81 billion, which is a 7.4 per cent increase compared to last year $1.69 billion. Net profit after tax rose 9.6 per cent to $327.7 million, while normalised profit rose 8 per cent to $362 million.

Management declared a final dividend of 16.5 cents which brings the full year distribution to 32.5 cents, up 8 per cent. The dividend yields approximately 3.3 per cent based on CGF’s last traded price as of this morning. The stock will trade ex-dividend on 1 September 2016 and the payment date is 28 September 2016.

The record annuity sales were boosted by Challenger’s inclusion on investment and administration platforms. Sales accelerated in the second half with annuity sales up 45 per cent on the prior corresponding period (pcp). The company is launching five new annuity partnerships over th next six months including a partnership with Suncorp.

Chief Executive Office Brian Benari said that Challenger is rewarding shareholders with record dividends: “Challenger is generating superior shareholder returns through a highly efficient, profitable and sustainable model. In our Life business we have been able to maintain consistent margins for the past four years which means the growth opportunities we are capturing feed directly through to our earnings and higher shareholder dividends. 

Double-Digit Growth for CGF’s Funds Management Business

Challenger’s Funds Management business is achieving double digit growth in FUM on the back of underlying flows of $2.4 billion during the financial year. Average FUM rose to $55.1 billion, 11 per cent on pcp. The company states that FUM has more than doubled over the past five years at an annual growth rate of 19 per cent per annum.

CGF has gained over 40 per cent over the past 12 months and the market values the company at over $5.5 billion. The company is trading at price to earnings (P/E) ratio of approximately 15 times normalised earnings.

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Simon Author: Simon Aug 16, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian. Simon worked for Wise-owl from 2013 until January 2020.

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