Asian wealth is playing an increasing role in the growth of this financial stock.
Thanks to a rising middle class with a greater demand for financial services, the company expects Asian business to grow to account for a quarter of its earnings. Overall, the company’s earnings beat the consensus estimate in the most recent quarter. And it has raised its dividend twice in the past year, for a current yield of 3.7%.
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SUN LIFE FINANCIAL INC. (Toronto symbol SLF; www.sunlife.ca) is Canada’s third-largest life insurance company by market cap, behind Manulife Financial (No. 1) and Great-West Lifeco (No.2). The company mainly sells life insurance, savings, retirement and pension products to individuals and corporations. Canada is the company’s largest market. It also operates it the U.S., Asia and the U.K.
In the three months ended June 30, 2018, the company earned $729 million. That’s up 5.8% from $689 million a year earlier. Earnings per share rose 7.1%, to $1.20 from $1.12, on fewer shares outstanding. That beat the consensus estimate of $1.15 a share.
As of June 30, 2018, the company’s assets under management were $986.1 billion, up 1.16% from $974.8 billion on December 31, 2017. The increase came mainly from favourable foreign exchange rates. They offset unfavourable stock market movements and an outflow of mutual funds.
Sun Life has big plans for its Asian business. Citing the rise of a generation of younger Asians with a more positive view of life insurance, it expects that business to grow to account for a quarter of the company’s earnings compared to the current 18 per cent.
As part of that plan, Sun Life aims to raise its stake in its Chinese insurance joint venture, from 25% to 51%, as soon as the Chinese government lifts the foreign ownership limit.
In the most recent quarter, net income for Sun Life’s Asian business rose 17.8%, to $145 million from $123 million a year earlier, led by significant growth in Hong Kong and the Philippines.
Blue Chip Stocks: Medical marijuana now an option in company’s group benefit plans
Starting March 1, 2018, Sun Life added medical marijuana as an option for its group benefits plans. The company provides health benefits coverage to more than three million Canadians and their families, or one in six Canadians.
Plan sponsors the option to add medical cannabis coverage to extended healthcare plans, ranging from $1,500 to $6,000 per covered person per year.
Sun Life says its medical cannabis coverage will be available for specific conditions and symptoms including cancer- related nausea, arthritis pain and palliative care.
At the same time, Sun Life said that clients who use marijuana, either medically or recreationally, will no longer be charged smoker rates, unless they also use tobacco.
With the June 2018 payment, Sun Life raised its quarterly dividend by 4.4%, to $0.475 from $0.455. That followed the company’s 4.6% dividend hike in December 2017. The dividend currently yields 3.7%.
Sun Life’s outlook is positive, and profit increases for its Asian and the U.S. operations should offset slower earnings growth in Canada. The stock trades at just 10.6 times the company’s forecast 2018 earnings of $4.81 a share.
Recommendation in TSI Dividend Advisor: Sun Life Financial is a buy.
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