- Morningstar says Prudential 15% behind fair value after rising 70% this year
Prudential shares remain ‘undervalued’ after strong growth this year, as the insurance giant dishes out bumper shareholder payouts, according to Morningstar.
The insurance giant has seen its shares rocket almost 70 per cent in 2025, as profits have soared and Prudential has rewarded investors with dividend hikes and a $2billion buyback scheme.
But Prudential shares remain around 35 per cent below their January 2018 peak.
This follows a ‘dramatic reduction in investor confidence in the insurer after ‘a number of missteps’, Morningstar’s equity analyst Henry Heathfield wrote in a note.
Heathfield cited the ‘arguably poorly timed divestments of its European, UK, and North American businesses’ after Prudential made the decision to shift its focus towards Asian and African markets.
Prudential also suffered the departure of its former CEO Tidjane Thiam and the halving of its dividend, he added.
Dividend hike: Prudential has ramped up shareholder payouts this year
Heathfield said Prudential ‘is now making clear and decisive moves to return capital’ to investors, but this has not yet been fully priced into the value of its shares.
He highlighted plans for additional share buybacks of $500million and $600million to be completed in 2026 and 2027 respectively, as well as Prudential’s partial divestment of its Indian fund management business.
Heathfield forecasts the spin-off will add $1billion to share repurchases over the next two years.
He added: ‘We [also] think Prudential is still on track to restore its dividend to above $0.45 per share, a 4.5 per cent yield— double its current one.
‘The last time Prudential paid this level of dividend was in 2019.’
Morningstar says Prudential shares at their current level of 1,060p are around 15 per cent below its fair value estimate of 1,210p.
Heathfield added: ‘After a period of investor uncertainty, Prudential is now making clear and decisive moves to return capital.
‘The combination of accelerated buybacks and the partial divestment of its Indian asset management arm signals a strong commitment to shareholder value.
‘We believe the market has not fully priced in the impact of these changes, which are poised to restore faith in the business and drive the share price upward as the yield improves.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
InvestEngine
InvestEngine
Account and trading fee-free ETF investing
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
