The best way to build wealth is to invest for the long term: buy a basket of stocks or funds that you can put away and forget aboutwhile they steadily grow and compound wealth.Aviva (LSE: AV),Prudential (LSE: PRU),Standard Life (LSE: SL) andAdmiral (LSE: ADM) are four companies that display all the qualities of buy-and-hold investments, which will help you build wealth over the long term.
Indeed, over the past few years, these companies have all proven themselves to be better than the competition by achieving above-average rates of earnings growth while offering some of the most impressive dividend yields around. Whats more, on a total return basis, all four of these companies have outperformed the wider FTSE 100 year-to-date. Including dividends, Aviva has returned 9.5% this year, Prudential has returned 7.4%, Standard Life has returned 5.0% including the special dividend paid earlier in the year and Admiral has racked up the best performance of the group with a total return of 30.2%. In comparison, the FTSE 100 has only returned 0.4% this year. And this performance looks set to continue as all four of these insurers are set to report high single, to mid double-digit earnings per share growth next year.
Prudential, in particular, is set to report earnings per share growth of 14% for full-year 2015 and 9% EPS growth for 2016. Based on these targets the companys shares are currently trading at a forward P/E of 13.9 and a 2016 P/E of 12.7, which looks cheap when you take into account Prudentials historic growth. During the past five years, Prudentials pre-tax profit has doubled from 1.8bn to 3.6bn. The companys shares support a dividend yield of 2.6%, and the payout is covered two-and-a-half times by earnings per share.
Aviva has staged a dramatic recovery over the past four or five years and now the company is beginning to grow again. EPS are set to contract by 11% this year, as the higher number of shares from Avivas acquisition of Friends Life weighs on this key metric. Nonetheless, next year Aviva is expected to return to growth with City analysts predicting EPS growth of 12% for the company, indicating that the shares are trading at a 2016 P/E of 10.2. Aviva currently supports a dividend yield of 4.1% and the payouts covered twice by EPS.
Standard Life is the most expensive of these four insurers and pension managers, but the companys growth is worth paying for. Standard Lifes EPS are set to grow by 48% this year, and a further 17% during 2016. The companys shares currently trade at a forward P/E of 17.8, but when you factor in the projected earningsgrowth, Standard Life trades at PEG ratio of 0.4 a PEG ratio of less than one signals that the shares offer growth at a reasonable price.
Admirals shares are only slightly cheaper than those of Standard Life at present. However, its the companys dividend thats really attractive to investors. Admirals shares currently trade at a forward P/E of 16.2 andCity analysts believe Admirals dividend payouts will equal a yield of 5.8% this year and 5.9% for 2016. Over the past fiveyears, the group hasreturned a total of 1.1bn to investors via both regular and special dividends.This works out as around 90% of Admirals net income generated over the period.
If you’re interested in seeking out more of the market’s top income stocks then why not check outthisFREEdividend report.
The report designed to help you discover and assess the market’s best income stocks, to create asustainable income stream from dividends.What’s more, the reporthighlightsthe five key rulesall serious dividend hunters need to follow.
The report iscompletely freeand without obligation. Justclick hereto download the free report today!
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.