Manulife Financial Corp. Bulks Up in Asia. Is it Time to Buy This Insurance Stock?

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) recently spent $1.2 billion to accelerate its growth in Asia, making this a stock for income investors to watch.

| More on:
The Motley Fool

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) has spent plenty of time and money increasing its presence in Asia. Although the market represents a relatively small part of Manulife’s business, the insurance company is betting the investments will pay off in the future. Manulife’s stock is cheap compared to many of its counterparts in the insurance and banking sector, so is this a good time to buy?

This week Manulife spent $1.2 billion on a 15-year insurance distribution deal with DBS Bank that covers markets in China, Hong Kong, Indonesia, and Singapore. Under the terms of the deal, Manulife will have access to approximately six million clients in the life and health insurance space. DBS has 200 branches and a sales force of more than 2,000.

Joining with DBS “accelerates our growth in Asia, deepens and diversifies our insurance business, and gives us access to a much wider range of customers,” said Donald Guloien, chief executive of Manulife, in a statement.

Barclays analyst John Aiken called the deal a “double win” for Manulife, because it is increasing its presence in the region (Manulife already has operations in the four countries) and re-affirming its position as a significant competitor and desirable partner in Asia.

“While investors will need to wait until 2017 for the accretion, we note that this should augment the momentum anticipated for 2016 for the merging economics of improving sales levels and the realization of the benefits from its efficiency and effectiveness program,” Aiken wrote in a note to clients. Even with the large outlay of cash, Manulife’s capital is expected to remain strong, Aiken said, with its regulatory capital ratio reduced by about 10 basis points on or before January 1, 2016.

Strangely enough, the recent slump in oil prices could be good news for Manulife, which recently signaled that it is interested in purchasing office towers and energy assets in Calgary, should the owners wish to sell.

“We are making it well known that we are a purchaser,” said Kevin Adolphe, who leads Manulife Asset Management’s private markets unit, in an interview with Bloomberg. “It usually takes a stress event for people to reset their expectations. We’re having these advance conversations so people know we’re interested.” Adolphe believes oil prices will stay low for a longer period than previous declines.

Manulife shares have been gradually recovering since declining to around $10 during the last recession and have climbed 7% in the past five years. The insurance giant, with nearly $700 billion in assets, recently reported 2014 net income of $3.5 billion, a 12% increase over 2013. Manulife increased its dividend by 19% in 2014. The current distribution of $0.16 per quarter yields 2.88%.

With the banks’ recent tepid performance on the markets, Manulife may just be the perfect tonic for income investors looking for a steady foothold in the financial services sector.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Doug Watt has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »