Manulife Financial Corp. Reminds Us of the Importance of Diversification

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) reported better than expected quarterly results. Given the diversified nature of the company, it’s likely to continue impressing.

| More on:
The Motley Fool

The importance of diversifying investments can’t be overstated. Finding a balance of investments that cater to both growth and dividend-paying objectives can be challenging at times.

Fortunately, there are some stocks in the market that are diversified and cater to both the growth and dividend-income audiences.

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) continues to impress analysts and investors alike.

Manulife is the largest insurer in Canada, proudly boasting having one in three Canadians as customers. While this is an impressive feat, it is also limiting from the perspective of growth, at least within the Canadian market. To counter the saturated Canadian market, Manulife has looked outside Canada in recent years to fuel growth.

Manulife has a growing presence in the U.S., where the company operates under the John Hancock brand, and, while the U.S. market continues to show growth for the company, Manulife’s venture into Asia is where real growth is taking shape.

Asian market potential

Asia is undergoing the largest wealth-generation boom ever seen. As the new middle class emerges, there is untapped demand for the insurance products Manulife offers. Some experts have pegged that the wealth market, which will be passed down to the next generation, is over US$30 trillion.

Manulife has been bolstering its exposure to Asia over the past few years to the point that a significant share of its earnings and nearly half of insurance sales are now attributed to Asia.

Part of the reason for this growth has been Manulife’s masterstroke deals in the region, which have allowed the company move in to nearly every country on the continent. The Singaporean market in particular has been a major growth source for the company; double-digit growth year over year is not uncommon.

The Trump factor

Turning back to North America, president-elect Trump has been particularly vocal about wanting to boost the U.S. economy, and interest rate hikes are central to that theme.

Even a small interest rate hike could spell significant gains for Manulife. To put the magnitude of this into perspective, consider the premium and claim business model that insurance companies adhere to. Insurance companies often invest premiums into an array of investments, such as securities or government debt, which currently pay little interest.

For a company such as Manulife, which has over $300 billion invested, even the slightest uptick in interest rates could result in billions of new revenue.

Quarterly results

Manulife provided quarterly results earlier this month, showcasing why it is such a great investment opportunity.

Overall, Manulife impressed with a 79.6% increase in profits–fueled by gains in the company’s diverse portfolio of investments.

In terms of earnings, Manulife reported $0.49 per share, bettering the $0.34 per share that some analysts had been calling for.

Within the Canadian division, net income increased 58% over the same period last year, coming in at $435 million. Canadian core earnings also showed an increase for the quarter, coming in at $1,025 million compared to the $900 million posted in the same quarter last year. Insurance sales in Canada were also up for the quarter by 27%, but when viewed on a year-to-date basis, insurance sales remain down by 13% over last year.

Another factor worth mentioning is Manulife’s dividend. Manulife currently pays a quarterly dividend of $0.19 per share, which, at the current stock price, results in an impressive 3.21% yield. When the dividend is weighed alongside the impressive results and growth prospects, the real potential of this stock starts to take hold.

Manulife is a great investment for any portfolio

Whether seeking dividend income or long-term growth, Manulife remains a great option for almost any investor or portfolio. Between the incoming U.S. administration that will likely push interest rates up and the continued growth potential coming from Asia, there’s still plenty of upside to Manulife.

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 Demetris Afxentiou has no position in any stocks mentioned.

More on Investing

edit U-turn
Investing

Rebound Rockets: 2 Beaten-Down Stocks You’ll Be Happy You Own in 2027

A stock market decline in 2022 presents buying opportunities on beaten-down Magna International (TSX:MG)(NYSE:MGA) and Shopify (TSX:SHOP)(NYSE:SHOP) stock. Here’s why.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks You Haven’t Bought Yet, But Should

I get it, these dividend stocks aren't doing so hot these days. But investors should buy now and think long…

Read more »

analyze data
Investing

What Are the Best Canadian Stocks to Buy Now?

As markets continue to sell off and investments trade at massive discounts, here are the best Canadian stocks to buy…

Read more »

warning or alert
Investing

BUY ALERT: 3 TSX Stocks to Buy for Dirt Cheap

Canadians on the hunt for opportunities in this bear market should target dirt-cheap TSX stocks like Cargojet Inc. (TSX:CJT).

Read more »

Nickel ore is mined from the ground.
Energy Stocks

3 Top Commodity Stocks TFSA Investors Can Buy Right Now

Commodity stocks such as Albemarle and Barrick Gold may provide investors an opportunity to deliver outsized gains in the next…

Read more »

Increasing yield
Investing

3 Safe Dividend Stocks to Buy With Yields Above 5%

These three dividend stocks have safe and reliable businesses and, after selling off in recent weeks, now offer incredible yields.

Read more »

analyze data
Investing

3 U.S. Stocks Canadian Investors Can Buy and Hold Forever

Are you interested in investing in U.S. stocks? Here are three picks that Canadians can buy and hold forever.

Read more »

telehealth stocks
Dividend Stocks

Retirees: 2 Dividend Stocks (With +6% Yields) for Worry-Free Passive Income

These TSX stocks offer attractive yields and have solid dividend payment histories, implying retirees can easily rely on them.

Read more »