With a market capitalization in excess of $50 billion, Manulife is a force to be reckoned with, with a strong past and a very promising future.
In the last five years, the company has seen a 15% compound annual growth rate (CAGR) in core EPS, a 28% CAGR in the business value in Asia, and strong growth in its global wealth and asset management business, with a 20% CAGR in assets under management — and all this while maintaining a strong capital position.
Here are three reasons investors should think about adding Manulife stock to their TFSA portfolios.
Returning cash to shareholders
In 2018, Manulife increased its dividend by 14% in a move that came earlier than expected at a greater magnitude than expected and more than last year’s 7% dividend increase.
Manulife stock is currently trading at a dividend yield of 4.54%.
Recently, management has been ramping up its share-buyback program, buying back 1.2% of its shares outstanding in the fourth quarter of 2018 with the intention of doubling its share-buyback program in 2019, as they believe Manulife stock is significantly undervalued.
Strong growth in wealth management and Asia
Manulife continues to see strong growth in wealth and asset management and in its expansion in Asia, making it so much more than a Canadian life insurer.
As evidence of this, we can just look to 2018 results. Manulife posted a better-than-expected 23% increase in core earnings, earnings per share of $2.74, and generated a solid ROE of 13.7%.
Core earnings in Asia were up 23% year over year, reflecting continued growth in that region and reflecting the general thesis.
Interest rate sensitivity
Although interest rates look set to stay low for a while, if you believe that rates will go up in the long term, Manulife is for you, as it has good sensitivity to rising interest rates.
According to Manulife, a 50-basis-point increase in interest rates would have a $100 million impact on net income and a meaningful effect on its Minimum Continuing Capital and Surplus Requirement ratio.
Manulife stock trades at a P/E of roughly 10 times this year’s earnings, well below its peer group (over 10 times) and its historical range. So, Manulife is trading at a discount relative to other life insurers but also relative to its own earnings growth and potential.
Investor skepticism, short-sellers, and a very public legal dispute has kept investors away, despite the company actually reporting good results for some time now.
Strong, better-than-expected results, continued undervaluation, and strong year-to-date stock performance of +14.5% have kept Manulife stock on my radar.
Investors should consider adding it to their TFSA for its dividend yield and growth potential.
When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.
Every investor knows that. But many struggle to identify the best opportunities.
Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.
Our top advisor Iain Butler has just identified his #1 stock to buy in 2019 (and beyond).
Fool contributor Karen Thomas has no position in any of the stocks mentioned.