Sun Life Financial Inc. (TSX: SLF)(NYSE: SLF) is likely to be my next stock play, as it’s a solid Canadian company paying dividends with price appreciation. Here are 10 reasons why Sun Life belongs in your portfolio.
1. A leading Canadian life insurer
Sun Life is the third-largest life insurer in Canada (by assets). In 2013, individual sales in its Canadian business grew by over 14%. For Q2 2014, it saw significant increases in insurance sales and individual wealth sales in Canada. Sun Life was voted ‘Most Trusted Brand in Life Insurance’ in Canada in 2013 by a Reader’s Digest Trusted Brand consumer survey.
2. Assets under management
In 2013, Sun Life had $640 billion in global assets under management (2012: $533 billion, 2011: $466 billion). At the end of Q2 2014, the company had global assets under management of $684 billion. This is important because its growth in assets under management boosted its Q2 profit.
3. New asset management business
This year, Sun Life formed Sun Life Investment Management Inc., which is an asset management firm for pension funds. Its goal is to fulfill the needs of pension plans, which the company says are “continuing to derisk and are striving for additional yield in this low interest rate environment.”
4. Diversification of operations
Sun Life is not beholden to one geographic area for its success. The company has operations in Canada, the U.S., the U.K., Australia, Bermuda, China, Hong Kong, India, Indonesia, Ireland, Japan, Malaysia, the Philippines, Singapore, and Vietnam. Sun Life commenced business in Malaysia and Vietnam in 2013.
5. Corporate confidence
This is an intangible that is part of a company’s culture and helps to drive growth. Some firms hope for success and timidly go after it, while others plan for it and aggressively chase it. Sun Life’s corporate goal is $1.85 billion in 2015 operating net income.
6. Operating cash flow
Sun Life’s cash flow from operating activities was $1.6 billion higher in Q2 2014 than in Q2 2013. Operating cash flow is key. It means a company has the money to meet its obligations to banks, suppliers, and such. Taking money in is a lot nicer than major outflows that are not adding value to a company.
7. U.S. group insurance business
The focus of Sun Life’s U.S. division is group and voluntary benefits delivered via the workplace. Furthermore, its U.S. business is focusing on medical stop loss insurance. Sun Life’s adjusted revenue in 2013 included 30% from the U.S. For Q2 2014, the company had solid increases in voluntary benefits and group insurance in the U.S.
8. Divesting for stability
Sun Life is focusing on less-volatile business segments for stable growth. Consequently, it divested certain holdings to improve its risk profile. One example is its divestiture of its U.S. annuity business last year. It stopped its U.S. life insurance sales in 2011.
9. Asian growth focus
The company is working to build its distribution capabilities in Asia. In 2013, for the third consecutive year, Sun Life of Canada (Philippines) Inc. was the leading life insurance company in the Philippines. The Sun Life sales force has more than 7,000 advisors in Indonesia.
10. Dividends
This week, Sun Life’s Board of Directors announced a quarterly dividend of $0.36 per common share. The company offers a healthy dividend yield of 3.60% and its five-year average dividend yield is 5.10%. Its annual dividend payout is $1.44. Sun Life Financial is one of the S&P/TSX 60 best dividend-yielding stocks.
Sun Life Financial is definitely a stock to consider for your portfolio. With strong growth in assets under management and a nice dividend yield it’s worth adding some insurance to your income portfolio.
