Canadian savers who missed the stock rally off the 2020 crash are getting another chance to buy top Canadian dividend stocks at reasonable prices for their self-directed RRSP portfolios.
Sun Life Financial
Sun Life (TSX: SLF)(NYSE: SLF) trades near $61.50 at the time of writing compared to $74 earlier this year. The stock is down amid a pullback across the broader financial sector that has hit bank and insurance stocks particularly hard in recent weeks.
Sun Life has insurance, wealth management, and asset management operations primarily located in Canada, the United States, the U.K., and Asia. The drop in global equity markets will impact the wealth management business in the near term, and a surge in COVID-19 across Asia and the United States in the first part of 2022 had an impact on the Q1 numbers.
Underlying net income dropped 1% in the first three months of 2022 compared to the same period last year. Underlying earnings per share slipped a penny to $1.44 in the quarter and underlying return on equity fell from 15.3% to 14%.
On the positive side, insurance sales jumped to $799 million compared to $730 million in Q1 2021. Assets under management rose slightly, although wealth sales, asset management gross flows, and the value of new business all fell year over year in the quarter.
Underlying net income rose 5% in Canada supported by a 42% gain in insurance sales, primarily due to a jump in group benefits sales at the Sun Life Health division. Canada wealth sales rose 11%, boosted by an increase in defined contribution retirement sales in the group retirement services segment.
Underlying net income in the American operations dropped 31% due to higher morbidity and mortality (illness and death) claims in group benefits plans largely as a result of COVID-19. Sun Life’s U.S. wealth and asset management operations, MFS and SLC Management, drove up underlying net income in the quarter by 12% compared to the first quarter of last year.
Asia underlying net income slid 4% in the quarter. The COVID-19 surge in Hong Kong had a negative impact on insurance sales. This was partially offset by better sales in India and Singapore. Wealth sales rose by 7% across the region with strength in the Philippines and India countered by lower sales in Hong Kong.
Despite the challenging environment, Sun Life announced a 4.5% increase to the dividend, bringing the quarterly payout to $0.69 per share. This is after the company increased the payout late last year by 20% from $0.55 to $0.66.
Should you buy Sun Life stock now?
Looking ahead, the COVID-19 impacts on sales and claims should largely end this year. At the same time, rising interest rates will enable Sun Life to generate better returns on the cash it has to set aside to cover potential claims.
The stock now trades at an attractive 9.5 times trailing 12-month earnings and offers a 4.5% dividend yield. Investors who buy at this level get paid well to wait for the market to realize the long-term growth potential of the Asia business. The expansion of the middle class in these high-population countries should drive strong long-term insurances and investment product sales.
