Is the Macquarie Group Ltd (ASX: MQG) share price a buy? It’s still down 30% due to the worries about the coronavirus impacts on its profit.
A couple of months ago on 23 March 2020 Macquarie’s share price actually fallen to around $72, so it has actually gone up 47% since then. But is it a buy now? A 30% decline is still a hefty discount to the pre-coronavirus price.
Macquarie is clearly going to experience some financial pain during the rest of the 2020 calendar year. It’s why the global investment bank recognised FY20 credit and other impairment charges of around $1 billion, up from $552 million last year, primarily related to the potential economic impacts of the coronavirus pandemic.
The second half net profit of $1.274 billion was down 13% on the first half of FY20 and down 24% on the second half of FY19. It’s clear that the profit is being hit and the Macquarie share price is matching that trajectory. Assets under management (AUM) were pleasingly up by 10% to $606.9 billion over the year. This provides a reliable source of revenue.
What about the Macquarie dividend?
The Macquarie Board don’t have a lot of control over the Macquarie share price but you can make interesting conclusions from the dividend decision.
Macquarie decided to halve the final dividend to $1.80 pre share, down from $3.60 a year ago. The total FY20 dividend was $4.30 per share, down 25%.
I think Macquarie shareholders can be quite pleased with that final dividend. Keeping more capital on the balance sheet is a good idea – no-one knows what’s going to happen next. But getting income is still good.
Macquarie did still pay a dividend, unlike Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) which deferred the dividends. And National Australia Bank Ltd (ASX: NAB) cut the dividend by even more than Macquarie.
Is the Macquarie share price a buy?
It has recovered strongly. There’s going to be less profit generation from Macquarie during this period. At the current Macquarie share price I’d much prefer it to Commonwealth Bank of Australia (ASX: CBA) and the other big four ASX banks due to Macquarie’s earnings diversification with its balanced segments, defensive asset management earnings and geographical spread of earnings.
Macquarie would probably be one of my preferred blue chips to buy today, but I feel there are better shares to buy out there.
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More reading
- Is it time to buy ASX banks?
- Macquarie picks the best stocks to buy for the post COVID-19 rebound
- ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble
- Why Macquarie, Telstra, United Malt, & Westpac are dropping lower
- ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.
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