Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) is the largest insurance provider in Canada which offers investors a bountiful 3.35% yield and international expansion opportunities for those looking to add some diversification to their portfolios. The company currently operates across 22 countries and provides peace of mind with its life insurance, health insurance, wealth management, property and casualty reinsurance products.
The company is firing on all cylinders with its Asian insurance operation, which I believe will be a huge long-term driver of earnings. You can bet the cash will go right back into the pockets of shareholders in the form of a raised dividend.
The Federal Reserve just hiked interest rates by 25 basis points, and this is great news for the insurers like Manulife. The American economy is looking strong, and this will be a huge tailwind that will propel the stock of Manulife higher over the medium and long term.
There’s no question that Manulife will be one of the biggest beneficiaries of the Trump Administration’s proposed corporate tax cuts and deregulation actions. Going forward, we can expect higher growth from the U.S. segment as consumers start buying life and health insurance products again, since the average consumer will have a higher income and will be more likely to spend money on products like life insurance. Many of these consumers will be upping their coverage for the first time since the Great Recession.
Manulife got crushed during the Great Recession as a ton of consumers got rid of their insurance coverage because they could no longer afford it. Life insurance is one of the top things to cut when times get tough, and that’s why it’s been difficult for Manulife to recover. The stock is still a long way from rebounding, but I think the company is on the right track thanks to the tailwinds sparked by the Trump Administration.
The company currently has $935 billion worth of assets under management and is starting to see its liquidity improve. This means more cash on hand that can be used to fuel further growth. The management team has its targets set on Asia, which is a terrific market that is showing real signs of promise. Many investors are afraid of the Asian segment because of its unpredictable nature, but I believe this fear is unwarranted.
The stock currently trades at a 17.32 price-to-earnings and a 1.2 price-to-book multiple. The dividend yield is also 0.35% more than the company’s five-year historical average yield of 3%, and it’s expected that this dividend will be raised by a substantial amount in the years ahead.
Given the tailwinds that the company will enjoy, the stock is far too cheap at current levels. If you’re looking for a great yield and want to spice up your portfolio with some international growth, then you should definitely pick up shares at Manulife at current levels.
