Which stocks are considered the safest for any retirement portfolio? To be honest, the ones which are the most boring! I’m talking about insurance companies, banks, and telecom utilities.
Despite being boring, these are the kind of businesses that never die. Let’s take the example of utilities, such as power and gas companies and your telecom service provider. Every month, these companies take their fee out of your bank account and you rarely complain.
This cash cow nature of their businesses make them perfect candidates for your retirement income portfolio, which you want to build to earn growing dividend income.
The other reason to own these dividend stocks is that you don’t want surprises every time you check your portfolio. Rather, you want these stocks to continue adding to your wealth slowly, which you’re building for your golden years.
In Canada, Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) is one such boring stock that fits nicely in this strategy. The nation’s largest insurer is a reliable dividend payer that can satisfy the income needs of future retirees. The company is in the middle of restructuring its business aiming to return more cash to investors.
Earnings momentum
The company’s latest earnings report shows that the insurer is in a solid position to achieve its financial goals. Manulife announced today that it’s boosting its quarterly dividend 12% after its profit more than doubled in the fourth quarter.
The Toronto-based insurer says it will increase the payout by three cents per share to $0.28, payable on or after March 19. For the full year, its net earnings grew 16.7% to $5.6 billion. Core earnings rose 7% to $6 billion or $2.97 per diluted share.
This strong performance was led by double-digit growth in Asia. Its insurance business in Asia added 15% in new business value, while its global wealth and asset management business generated net inflows of $4.9 billion despite the impact of a challenging operating environment, according to Chief Executive Officer Roy Gori.
As part of its turnaround plan, Manulife has set a target to free up to $5 billion in capital by 2022. The main pillar of this strategy is to exit business lines that don’t fit in the company’s future growth initiatives. Another important part of the company’s new strategy was to cut its expenses by $1 billion by 2022.
Bottom line
Manulife stock, trading at $26.62 at the time of writing, has jumped 26% in the past 12 months — a surge that’s mainly the result of the company’s successful turnaround strategy. For long-term investors, I still see value in locking in the company’s 3.7% dividend yield.
