3 Reasons to Buy Manulife Financial Corp. Today

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) is a strong buy today for three reasons. Does it belong in your portfolio?

| More on:
The Motley Fool

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC), one of the world’s largest financial services companies and one of the 10-largest life insurers by market capitalization, has disappointed investors in 2015. It has fallen more than 7.5%, but it has the potential to rebound and head significantly higher in both the short and long term. Let’s take a look at three of the primary reasons why I think this could happen and why you should be a long-term buyer of the stock today.

1. Its double-digit growth in the first half could support a quick rebound

On the morning of August 6, Manulife released strong earnings results for its three and six-month periods ending on June 30, 2015, but its stock has responded by falling over 12% in the weeks since, primarily due to the downturn in the market. Here’s a summary of eight of the most notable statistics from the first half of fiscal 2015 compared with the first half of fiscal 2014:

  1. Core earnings increased 19.6% to $1.7 billion
  2. Diluted core earnings per share increased 13.7% to $0.83
  3. Revenue before realized and unrealized gains and losses increased 20.5% to $21.76 billion
  4. Net premium income increased 31.5% to $10.98 billion
  5. Investment income increased 6.9% to $5.86 billion
  6. Assets under management and administration increased 38.6% to $883 billion
  7. Cash provided by operating activities increased 31.6% to $5.49 billion
  8. Book value per common share increased 19.9% to $17.89

2. Its stock trades at inexpensive forward valuations

At current levels, Manulife’s stock trades at just 11.4 times fiscal 2015’s estimated earnings per share of $1.79 and a mere 9.8 times fiscal 2016’s estimated earnings per share of $2.08, both of which are very inexpensive compared with its five-year average price-to-earnings multiple of 54.3 and the industry average multiple of 22.4.

I think Manulife’s stock could consistently trade at a fair multiple of at least 15, which would place its shares upwards of $26 by the conclusion of fiscal 2015 and upwards of $31 by the conclusion of fiscal 2016, representing upside of more than 26% and 51%, respectively, from today’s levels.

3. It has a 3.3% dividend yield with room for growth

Manulife pays a quarterly dividend of $0.17 per share, or $0.68 per share annually, giving its stock a 3.3% yield at current levels, and this is significantly higher than the industry average yield of 1.9%. It is also worth noting that the company has increased its dividend twice since 2014, and its strong operational performance could allow for another increase in the very near future. 

Should you start buying shares of Manulife today?

I think Manulife Financial could be one of the market’s top performing stocks from this point forward. Its strong earnings results in the first half could support a quick rebound, its stock trades at inexpensive forward valuations, and it has a 3.3% dividend yield, which will amplify the potential returns for investors. All Foolish investors should take a closer look and strongly consider beginning to scale in to positions today.

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 Joseph Solitro has no position in any stocks mentioned.

More on Investing

Canadian Dollars
Stock Market

Where to Invest $5,000 in April 2024

Do you have some extra cash to spare? Here are five companies to invest $5,000 in next month.

Read more »

Plane on runway, aircraft
Stocks for Beginners

Up 53% From its 52-Week Low, Is Cargojet Stock Still a Buy?

Cargojet (TSX:CJT) stock is up a whopping 53%, nearing closer to 52-week highs from 52-week lows, so what's next for…

Read more »

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

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 »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »