Battle of the Heavyweights: Sun Life Financial Inc. vs Manulife Financial Corp.

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) and Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) both released earnings this week and boosted their dividends. Which stock is the better buy?

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The insurance sector in Canada is highly competitive and two of its strongest players are Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) and Manulife Financial Corp. (TSX:MFC)(NYSE:MFC). Both companies released quarterly earnings reports this week, but which one is the better buy for dividend investors?

Sun Life reported first-quarter underlying net income of $516 million, or $0.84 per share, up from $440 million, or $0.72 per share, in the same quarter last year, which beat analyst estimates of $0.77 per share. Perhaps more importantly, Sun Life announced a 6% dividend increase, bumping up its dividend by two cents per share to $0.38. Although investors were spared a dividend cut during the financial crisis, this was Sun Life’s first increase since 2008.

“Our first-quarter underlying earnings were strong, driven by solid contributions from all four pillars,” said president and CEO Dean Connor. Analysts were generally pleased with Sun Life’s earnings. Barclays’ John Aiken noted the insurer’s solid profits should help the company regain some of the valuation it lost in the last quarter. “We have very few complaints, and we would anticipate that the results will rewarded by the market,” Aiken said. Sun Life shares are down 5% year to date.

Manulife, on the other hand, reported slightly weaker profits largely due to investment losses. The insurer said its quarterly net profits fell to $723 million, or $0.36 per share, compared with $818 million, or $0.42 a share, a year earlier.

Aiken notes that Manulife reported core earnings of $0.39 per share, below consensus ($0.43) and Barclays’ forecast ($0.44). However, he notes that much of the investment drag was related to oil exposure, which could be a non-factor by the second quarter. “Although we believe that the initial reaction may be negative, we would expect support to return in reasonably short order,” Aiken said.

Manulife increased its dividend by 10%, or 1.5 cents per share, to $0.17 per share, bumping up its dividend yield 25 basis points to 3%.

With millions of baby boomers at, or nearing, retirement, the demand is increasing for financial protection products. Combined with the rising popularity of annuities as the responsibility for retirement income shifts to the individual, both Sun Life and Manulife are well positioned for the future. Ultimately, the battle between the two companies may be won and lost in Asia, where both firms have invested heavily.

But that’s in the future. For now, if there’s only room for one insurance stock in your portfolio, go with Sun Life, which performed better than Manulife in the first quarter and has a superior dividend yield.

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

Path to retirement
Dividend Stocks

Got $5,000? Buy These 2 Stocks and Hold Until Retirement

There are some stellar stocks to buy now and hold until retirement. Here's a look at two options if you…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

RRSP Investors: How to Build Retirement Wealth With Top Canadian Dividend Stocks

RRSP investors are using this investing strategy to create substantial savings for retirement.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Want Easy Passive Income Every Month? Buy These 2 Canadian Stocks and Hold Forever

Earning reliable monthly passive income in Canada is not very difficult if you buy these quality dividend stocks today.

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

TFSA Pension: 3 Top Canadian Dividend Stocks to Start a Self-Directed Retirement Portfolio

These top TSX stocks look cheap today and pay attractive and growing dividends for TFSA investors seeking passive income and…

Read more »

analyze data
Dividend Stocks

2 Top TSX Stocks to Buy Now and Hold Forever

Here's why Restaurant Brands (TSX:QSR)(NYSE:QSR) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are stocks to buy now and hold forever.

Read more »

Wireless technology
Dividend Stocks

New Investors: 1 Top TSX Stock to Inflation-Proof Your TFSA

BCE (TSX:BCE)(NYSE:BCE) stock has a great dividend and a hidden catalyst that could help propel shares much higher.

Read more »

Growing plant shoots on coins
Dividend Stocks

Beginners: 2 Dividend-Growth Stocks to Buy Now and Hold Forever

CP Rail (TSX:CP)(NYSE:CP) and CIBC (TSX:CM)(NYSE:CM) are intriguing TSX stocks for new investors to hold in their TFSAs for the…

Read more »

financial freedom sign
Dividend Stocks

5 Top Canadian Stocks for a Lifetime of Passive Income

Want regular passive income regardless of market conditions? Invest in these five Canadian stocks now.

Read more »