MANULIFE FINANCIAL CORP. $22(Toronto symbol MFC; Conservative-Growth Payer Portfolio; Finance sector; Shares o/s: 2.0 billion; Market cap: $44.0 billion; Dividend yield: 4.5%; Dividend Sustainability Rating: Above Average; www.manulife.ca) is Canada’s largest life insurance provider. It also sells other forms of insurance, including health, dental and travel plans. That’s in addition to offering mutual funds and investment management services.
Starting with the December 2018 payment, Manulife raised its quarterly dividend by 13.6%, to $0.25 a share from $0.22. The new annual rate of $1.00 yields a high 4.5%. The company’s dividend payout ratio is 31.6%. That’s at the low end of its annual target of 30% to 40%
In the quarter ended September 30, 2018, the company’s earnings jumped 41.8%, to $1.5 billion from $1.1 billion a year earlier. On a per-share basis, earnings rose 41.5%, to $0.75 a share from $0.53. The increase is due to strong growth for Manulife’s Asia and Global wealth and asset management businesses. Lower U.S. taxes also contributed.
The company’s earnings in Asia specifically rose 22.2%, to $457 million from $374 million a year earlier. That was the result of 13% annualized premium growth, with an especially strong gain in Japan and Hong Kong. The U.S. saw a 14% increase in annualized premiums, which was offset by a 14% decline in Canada.
Assets under management and administration for Manulife’s wealth and management business were $644.0 billion on September 30, 2018. That’s 7% higher than a year earlier.
Manulife has entered into agreements with three reinsurers for $13 billion of its riskiest annuity and universal life policies. That should free up $585 million in the fourth quarter, and an additional $470 million in 2019.
The stock trades at just 8.0 times the company’s likely 2019 earnings of $2.76 a share.
Manulife Financial is a buy.
SUN LIFE FINANCIAL INC. $49(Toronto symbol SLF; Conservative- Growth Dividend Payer Portfolio, Finance sector; Shares outstanding: 603.3 million; Market cap: $29.6 billion; Dividend yield: 4.1%; Dividend Sustainability Rating: Above Average; 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).
With the December 2018 payment, Sun Life raised its quarterly dividend by 5.3%, to $0.50 a share from $0.475. The new annual rate of $2.00 yields a high 4.1%. The company’s payout ratio in the third quarter was 40%, well within its medium-term goal of 40% to 50%.
In the three months ended September 30, 2018, the company earned $730 million. That’s up 13.5% from $643 million a year earlier. Earnings per share rose 14.3%, to $1.20 from $1.05, on fewer shares outstanding.
As of September 30, 2018, Sun Life’s assets under management were up 5.3%, to $983.5 billion from the $933.6 billion a year earlier. While there was a net loss of mutual fund investment, that was offset by favourable foreign exchange rates and higher stock prices.
Sun Life currently operates in seven Asian countries, including China, India and the Philippines, and has big plans for that business unit. In the 12 months ended September 30, 2018, Asian operations accounted for 17% of its net income. Sun Life feels annual earnings for that unit could double over the next five years, to $900 million from the current $450 million.
The company also recently launched Lumino Health, a digital platform that provides clients with information and ratings on more than 150,000 health providers across Canada. It also offers reviews by existing Sun Life clients. Those offerings are intended to help them live healthier lives.
The company should earn $4.84 a share in 2019, and the stock trades at 10.1 times that estimate.
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