Genworth MI Canada Inc. (TSX:MIC) Is the Top Housing Stock to Own Today

CMHC has projected an increase in housing prices into 2019, which should inspire investors to take a look at Genworth MI Canada Inc. (TSX:MIC) in the second half of the year.

The Motley Fool

The recent Ontario election carried the possibility of dramatic shifts in the province’s housing landscape. However, as I’d discussed here, those changes will likely impact builders more than the loan books and stock prices of alternative lenders. Does that mean investors should steer clear of the industry entirely? Absolutely not.

Canada Housing and Mortgage Corporation (CMHC) released a report on housing on June 14. It concluded that housing prices in Ontario will range from $562,000 and $575,000 this year and will reach between $570,000 and $595,000 in 2019. “Home prices are plateauing and are expected to grow along a more sustainable linear path supported by continued economy growth, moderate increases in interest rates and only moderate increases in new housing supply,” said CMHC economist Ted Tsiakopoulos.

The incoming Ford government has vowed to increase housing supply and improve affordable housing going forward. Reports indicate that the government will seek to streamline approval processes for building projects. There were rumours that the PCs would also push to develop the greenbelt, but the party abandoned this promise in the last month of the campaign.

This supply crunch will be crucial in supporting prices going forward. The Canadian population grew by one million over the past two years and two months, the fastest increase in the country’s history. New migrants and non-permanent residents accounted for 85% of this increase. Arrivals in Canada’s major metropolitan cities accounts for 78% of population growth. A census last July revealed that 35% of Canadians lived in the greater Montreal, Toronto, and Vancouver areas.

With this in mind today, we will take a look at my top housing stock to own as we head into the second half of 2018.

Genworth MI Canada Inc. (TSX:MIC) is a private residential mortgage insurer based in Oakville. Shares of Genworth have climbed 5.3% month over month as of close on June 15. The stock is up 29% year over year, but it has suffered from volatility in 2018. The company released its first-quarter results on May 1.

Mortgage borrowing fell by $2 billion year over year in the first quarter of 2018, negatively impacted by the housing climate in Toronto and Vancouver. At Genworth, transactional premiums written bucked this trend and were up 22% year over year to $109 million.

New OSFI mortgage rules imposed a stress test on uninsured borrowers. Genworth had already felt the impact of the stress test, which was imposed on insured borrowers in late 2016. By far, the most positive impact on earnings was the 18% higher average premium rate, which occurred on March 17. Overall premiums written were down 30% year over year.

Net income at Genworth climbed 20% from Q1 2017 to $128 million, and net operating income was up 11% to $119 million. Losses on claims were down $4 million from the prior year due to a decrease in new delinquencies. The company also announced an attractive quarterly dividend of $0.47 per share, representing a 4.3% 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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Investing

Oil pumps against sunset

Oil or Tech? Why Choose When You Can Get Both in a Single Stock?

Tech stock Pason Systems (TSX:PSI) is exposed to the energy market boom.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.

Protect Against Inflation With 2 Top TSX Stocks

Here are two top TSX stocks that long-term investors concerned about inflation may want to consider in this time of…

Read more »

Woman has an idea
Tech Stocks

The Smartest Stocks to Buy With $20 Right Now and Hold Forever

These under-$20 stocks have the potential to grow further with time and deliver solid capital gains.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

TFSA Investors: Put $45,000 in These Top TSX Stocks and Watch Your Passive Income Roll In

Are you looking to retire early? Here are a few ideas about how your TFSA could earn a passive-income stream…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Love Passive Income? Here’s How to Make Plenty of it as a Real Estate Investor

You could definitely create passive income by investing in pure real estate, but you could make just as much, if…

Read more »

Make a choice, path to success, sign
Dividend Stocks

2 High-Yielding Dividend Stocks You Can Buy and Hold for Years

These two high-yielding dividend stocks can be the perfect addition to your portfolio, as the bear market causes payout yields…

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

Why Investors Shouldn’t Give Up on Shopify Just Yet

Here's why long-term investors may not want to throw in the towel just yet on e-commerce juggernaut Shopify (TSX:SHOP).

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA Wealth: How to Turn $88,000 Into $1 Million for Retirement

Canadians can use the TFSA to hold a basket of diversified equity investments, allowing you to turn a $88,000 investment…

Read more »