The proportion of Munich Re (WKN: 843002) has meanwhile represented a very favorable opportunity. With the shares falling to a 52-week low of around EUR 205, investors have the opportunity to buy the DAX reinsurer with a favorable valuation and a high yield. .
Meanwhile, the dividend yield alone was over 5%. Even a price-to-earnings ratio of less than 10 promised a lot of value potential. We must not forget that the management, for example, has not cut its own dividend since 1969.
But the days of a share price of 205 euros are over. Meanwhile, Munich Re shares have risen to EUR 250 or have already passed the mark. Has this opportunity now been missed?
Munich Re: How much more expensive is the share now?
The Munich Re share is now more expensive. First of all, it’s obvious. At a price level of 250 euros, the share certificates are around 22% above the low point of the current correction. The prize is not insignificant.
Despite this, we still see a lot of value at a relatively cheap price in DAX reinsurance. With a yield of 4.4%, we continue to generate solid passive income. Additionally, the 2021 price-to-earnings ratio is now around 12. That’s not really expensive, especially since there is growth in the pipeline for fiscal 2022.
Munich Re’s management expects a profit of EUR 3.3 billion. As a result, the price-to-earnings ratio could fall back to well below 11. If this forecast is successful, the dividend stock will likely see an increase in its dividend as well. There is also enough room for share buybacks.
So my personal conclusion is: Yes, the really very good opportunity with Munich Re shares was missed. But we still see a moderate to cheap valuation target at current share prices. Even at this course level, you can definitely get further into the game, or at least put a toe in the door. Especially since the medium-term forecast up to 2024 also speaks of further growth. It is therefore more likely that it is cheaper than more expensive in the evaluation.
Not a stable business model every year!
Of course, Munich Re has a risk here: there is a business model that cannot be planned every year. Hurricanes or other severe weather events are difficult to predict with certainty. Nevertheless, the management has succeeded in making the share a solid and historically stable dividend payer. That is a strong quality for me.
With this rating, I therefore still see a long-term opportunity. A strong dividend and solid appreciation are possible.
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Vincent owns shares in Munich Re. The Motley Fool does not own any shares listed.