Graham Spooner, investment research analyst at The Share Centre, explains why Saga is share of the week this week:
In its latest results, Saga, which offers an array of products and services exclusively for the over 50’s, including insurance, holidays and breakdown cover, reported a 5.6% increase in underlying profit to £187.4m. Interested investors should appreciate that the dividend was also raised by 18.1% to 8.5 pence. Furthermore, the CEO highlights the proposed launch of a membership scheme, Saga Possibilities, aimed at its core group of customers who buy premium products, are loyal to brand and who often buy multiple products.
Investors should note that management are keen to move the company away from its main insurance and holiday services to other areas, such as taking commission from third parties who will use the brand name, new services such as SagaMoney and a retirement village, as well as cross-selling its products.
Although we are gearing this recommendation for income seekers due to its prospective 4% yield the potential for the group to continue to benefit from the increasingly important over 50's market and its brand name will hopefully lead to some steady long-term growth. We therefore recommend this stock as a ‘Buy’ for investors willing to accept a medium level of risk.