Canadian Wealth Advisor Used to own MFC but my preference is now SLF. GLTA
Growth for our two top Canadian insurance recommendations—including for their Asian operations—may be slowed by the COVID-19 outbreak.
However, both should rebound quickly once the coronavirus outbreak eases. In the meantime recent dividend hikes have also boosted income for investors.
MANULIFE FINANCIAL CORP. (Toronto symbol MFC; www.manulife.ca) is Canada’s largest life insurer.
Manulife sells other forms of insurance, including health, dental and travel plans; its mutual funds and investment management services further diversifies its revenue stream.
As of December 31, 2019, the company had $1.2 trillion in assets under administration. Increasingly, markets outside of Canada contribute to its growth—and investor value.
In the quarter ended December 31, 2019, overall earnings rose 10.5%, to $1.48 billion from $1.34 billion, a year earlier. With fewer shares outstanding, investors saw earnings per share rise 12.3%, to $0.73 from $0.65. Profits in Asia rose 6.5%, to $494 million from $463 million.
Manulife continues to focus on controlling its costs. In 2019, its core expense growth was 3%, less than half its historical average. It also managed to find $700 million in total expense savings in 2019. Investors can expect those savings to rise to $1 billion by 2022.
With the March 2020 payment, Manulife handed its investors a 12.0% dividend hike. The new annual rate of $1.12 a share gives you a high 6.5% yield. In the latest quarter, the company paid investors 34% of its earnings, well within its target range of 30% to 40%.
Blue Chip Stocks: This Firm Yields 4.6% On A Modest Payout Ratio
SUN LIFE FINANCIAL, (Toronto symbol SLF; www.sunlife.ca) sells life insurance, savings, retirement and pension products.
The company operates in Canada, the U.S., Asia and the U.K. It has $1.13 trillion in assets under management.
In the quarter ended December 31, 2019, Sun Life’s earnings rose 10.3%, to $792 million from $718 million. Investors saw earnings, on a per-share basis, rise 12.6%, to $1.34 from $1.19, on fewer shares outstanding.
More specifically, earnings from Canadian operations increased 7.8% on strong Group Retirement sales. U.S. earnings improved 13.2% as a result of lower life insurance claims and higher gains on its investment holdings.
Sun Life’s earnings in Asia gained 2.1%, reflecting higher demand for insurance and wealth management products.
The company recently added value for investors by streamlining its wealth management operations: they’re now consolidated under the “SLC Management” banner. In the fourth quarter, SLC had net inflows of $600 million U.S. and $148.2 billion in assets under management.
In December 2019, Sun Life raised your quarterly dividend 5.0%, to $0.55 a share from $0.525. Today’s annual rate of $2.20 yields a high 4.6%. The company’s payout ratio in the 2019 fourth quarter was 41%, at the low end of its medium-term goal of 40% to 50%.
Recommendation in Canadian Wealth Advisor: Sun Life Financial Inc. and Manulife Financial Corp. are buys.