Suncorp - An attractive stock based on RARI's methodology

RARI ESG ETF Stock Story

Russell Investments Australian Responsible Investment ETF (RARI) methodology assesses companies on their Environmental, Social and Governance (ESG) characteristics as well as dividend attributes, to provide investors with a portfolio that is better than market on both metrics through time.

Suncorp is one of RARI’s larger overweight positions, having a bet of over 1% relative to the ASX200. The Financials sector (including insurance companies) has historically been a fertile part of the Australian market for dividend payers and although the last 18 months has been volatile for company dividends, this is still the case on a relative basis.

Suncorp’s relatively stable dividend through history as well as strong future prospects for providing above-market income to investors makes it an attractive stock based on RARI’s scoring process. The company management’s relatively strong management of relevant ESG issues drives a high ESG score for the stock versus the broader market.

Suncorp reported strong full year earnings in early August, a result which was well received by the market; the stock finished up almost 8% on the day.

The company also reported an FY21 dividend that was above consensus expectations, whilst also announcing a special dividend for investors. RARI has been a long-term holder of Suncorp, in part due to the methodology’s inclusion of forward dividend metrics, and this has been rewarded through 2021

Suncorp has returned over 38% through 2021, including an income return of almost 12% for investors; this return is over 27% higher than the return of the ASX200 over the same period. RARI’s position in Suncorp has contributed 19 bps of the portfolio’s excess return through 2021, and 10 bps of excess return through reporting season in August.

Source: Bloomberg as at 19/8/21.

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