Two of the biggest fears shaking financial markets of late have been coming from the States, namely the prospect of numerous Federal Reserve interest rate hikes through 2019 and President Trump’s intensifying trade battle with the rest of the planet.
Needless to say, these are equally big problems for the world’s emerging markets and represent a potential short-term hiccup for Prudential (LSE: PRU), a Footsie share which sources the lion’s share from the growth markets of Asia. But City analysts seem quite nonplussed at the current time and they are forecasting further strong earnings growth at the business, by 9% and 10% in 2019 and 2020 respectively.
And this leads to expectations of further dividend growth, naturally. Full-year payouts of 55.4p and 60.1p per share are predicted for this year and next, projections that yield a juicy 3.9% and 4.2%.
Giddy global growth
It’s not surprising to see why the number crunchers remain so optimistic. The Pru’s established status in emerging regions means it has its finger on the pulse of the savings needs of the increasingly-wealthy citizens there, and it has proved adept at tailoring its products and services to reap the fruits of these hot markets. This is what prompted a 19% improvement in new business profit across its health and protection lines in Asia in the nine months to September, for example.
Even in the event of a sharp macroeconomic slowdown across the region, this regional expertise should allow Prudential to ride out the worst of it.
Besides, it’s worth noting the Footsie firm’s excellent progress in the US and in the UK and Ireland too, regions that can take some of the sting out of any struggles in Asia. Let’s not forget that new business profit in the States, and at its soon-to-be-spun-off, pan-European M&G Investments division, jumped 22% and 18% respectively from January to September.
Another Footsie star
The population boom and rising wealth levels of developing regions also bodes well for InterContinental Hotels Group (LSE: IHG) in the coming decade as it adds rooms to its global hotel network.
I’ve previously discussed the excellent progress the FTSE 100 firm is making in China, as shown in its most recent trading update. But this is not the only emerging territory where it is making serious waves — RevPAR (or revenues per available room) growth of 6.5% in Latin America and the Caribbean was recorded in the nine months to September, driven by the regional engine room of Brazil as well as Colombia, while revenues in Mexico jumped 5.4%. In Russia, these rose by double-digit percentages, although the impact of the FIFA World Cup helped lift demand, of course.
Helped by that ambitious expansion strategy, City analysts predict earnings growth of 7% this year and 9% in 2020, figures that lead to expectations of more fizzy dividend growth. Thus full-year payouts of 129 US cents and 142 cents per share are estimated for 2019 and 2020 respectively, figures that yield a handy-if-unspectacular 2.2% and 2.4%.
Those yields might make InterContinental Hotels for many investors a less appealing pick than Prudential, as may the chain’s forward P/E ratio of 17.5 times (the insurance giant sports a corresponding reading of 8.9 times). That said, I reckon both shares have what it takes to generate brilliant returns over the next 10 years, and I therefore believe both are great buys today.