Stock of the week: Sun Life FinancialStock of the week: Sun Life Financial
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Sun Life has done well since it began operating as a public company in
2000. (Before it de-mutualized, the company was owned by its policy-
holders). For one thing, except for a slight setback in 2002, Sun
Life's earnings per share have increased steadily.
Earnings per share are growing this year too. In the six months to
June 30, Sun Life earned record profits of $1.005 billion , or $1.71 a
share - excluding a one-time after-tax charge of $2 million. That's up
by 8.9 per cent from $935 million, or $1.57 a share, in last year's
first half. Even better, all five of the company's divisions delivered
better earnings.
Just remember that the stronger Canadian dollar worked against Sun
Life in the first half. That's because of its growing international
operations. Had the loonie remained at the same level as in last
year's first half, the company's earnings would've risen by $46
million, or eight cents a share. On this basis, Sun Life's earnings
per share rose by 14 per cent.
The stronger performance also shows up in Sun Life's return on common
shareholder's equity, or ROE - a critical measure in financial
services. In the first half, its ROE jumped to 13.4 per cent. That's
up from 12.8 per cent in last year's first half. Even better, the
trend remains up. In the second quarter, ROE increased further to 13.6
per cent. ROE would have hit 14 per cent had the loonie remained
stable.
For all of 2006, Sun Life is expected to earn $3.55 a share. That's up
by almost 10 per cent from $3.23 a share last year - excluding one-
time charges of $63 million, or 11 cents a share.
Thanks to its improving earnings, Sun Life has increased its dividend
every year without fail. In fact, it has just raised its dividend
again on the strength of its record earnings in the first half. The
company now pays $1.20 a share. That's up by 9.1 per cent from $1.10 a
share. The dividend now yields 2.8 per cent. As Sun Life's earnings
per share increase further, we expect it to keep raising its dividend.
Sun Life has also bought back its own shares each year since 2002. In
the first half of 2006, it spent $398 million to buy back 8.5 million
shares. The average number of shares outstanding fell below 579
million by the end of the second quarter. That was well down from a
peak of 618 million shares in 2002. As the number of shares fall,
earnings per share rise, all else being equal. No wonder the shares
are up more than 200 per cent since going public in 2000.
Buy Sun Life Financial Inc. (TSX-SLF, $43.95) for long-term gains and
increasing dividends.