Manulife Financial Corp.: Should You Buy This Stock?

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) has bounced back from the painful days of the financial crisis, but investors should still be cautious when evaluating the stock.

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Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) lost a lot of friends when it cut its dividend during the financial crisis.

The company has worked hard in recent years to right the ship, and the return to dividend growth is starting to bring investors back into the name.

Let’s take a look at Manulife to see if it deserves to be in your portfolio right now.

Acquisitions

Manulife is in full growth mode now that its balance sheet has been repaired. In 2014 the company spent $4 billion to acquire the Canadian assets of Standard Life Plc, a move that added 1.4 million customers and launched Manulife into a leadership position in the Quebec market.

The province had been a difficult place for Manulife to make inroads, and the new assets position it well to take advantage of strong growth opportunities.

Manulife and Standard Life also plan to cross-sell products to each other’s global clients. That arrangement could turn out to be very profitable, especially in high-growth countries like India where Manulife doesn’t currently have a presence.

The Asian market is a priority for Manulife as it looks to tap growing wealth in the region’s middle class. In April of this year, Manulife signed a 15-year agreement with Singapore-based DBS Bank Ltd to have exclusive access to the company’s customers in several markets.

In the U.S., Manulife recently closed a deal to acquire the Retirement Plan Services division of New York Life. The deal adds $56 billion in assets under management to John Hancock, Manulife’s wealth-management company.

Earnings profile

Manulife’s Q2 2015 earnings were a bit of a mixed bag. The company’s core year-over-year earnings rose 29% on the back of strong growth in Asia, but net income actually fell by 36% as a result of a $362 million charge due to changes in interest rates. After the financial crisis, Manulife and its peers took measures to de-risk exposure to both equity markets and interest rates, so the big hit is a surprise.

Dividend growth

The 50% haircut in the dividend was a tough pill to swallow when Manulife was scrambling to shore up its balance sheet during the Great Recession.

Last year the company finally raised quarterly payout by 19% to $0.155 per share. Another increase this April moved the dividend up to $0.17 per share. As the recent acquisitions become accretive, investors should see the distribution hikes continue.

Is it time to buy?

Manulife is certainly on the mend, and the stock has doubled off the lows reached during the financial crisis. The shares trade at a reasonable 10.5 times forward earnings and the long-term outlook is pretty good.

I would still wait for another quarter or two before buying the stock to make sure there aren’t any more unexpected earnings zingers.

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 Andrew Walker has no position in any stocks mentioned.

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