The Toronto Stock Exchange (TSX) has a wide selection of quality stocks depending on your investment strategy. Many companies have earned Dividend Aristocrat status for their impressive dividend-growth streaks (five years or more). However, everyone is overlooking one company whose payout keeps getting bigger.
Sun Life Financial (TSX:SLF) is Canada’s third-largest insurance company based on annual premiums collected and total assets. Apart from the home country, this $39.2 billion insurer and financial services provider operates in markets worldwide and is a household name in some countries.
The insurance stock belongs to the prestigious Dividend Aristocrat list, owing to eight consecutive years of dividend increases. If you invest today, the share price is $67.18 (+8.06% year to date), while the dividend yield is an attractive 4.52%. The yearly increase is at least 3%, although the hike in 2020 was 20%, including the special dividend.
Balanced, diversified business model
Sun Life’s existence dates back to 1865 and today has several product lines in addition to the traditional life insurance offer. It has a vast network of financial advisors and distributors that market and sell its flagship products (Sun Term and Sun Spectrum Term). The company is also strong in the wealth and asset management market.
Insurance sales in 2022 topped $4.3 billion (17.6% year-over-year increase), although reported net income dipped 28.5% to $3.06 billion versus 2021. Nevertheless, Sun Life president and chief executive officer (CEO) Kevin Strain said, “Our balanced and diversified business model supported solid 2022 results.”
In the first quarter (Q1) of 2023, reported net income rose 21.2% to $806 million compared to Q1 2022. The quarter’s highlight was the 146% year-over-year net income growth of the Group – Health & Protection to $303 million. Strain said, “We started 2023 with strong results driven by our execution capabilities and growth in our health and protection businesses.”
The combined individual sales of $375 million in Hong Kong, India, the Philippines, and international markets were 26% higher than in 2022. Hong Kong and the Philippines are strong growth markets in Asia, where Sun Life hopes to maintain its leadership position.
Growth plans and outlook
According to Strain, Sun Life is building its capital position and aims to use available cash to expand organically. He said, “We’re in economic times that are a little bit more turbulent, so having a strong capital position is good for that. Our priorities are organic growth.”
Strain advised businesses and investors to get used to higher rates until 2024, at least. While Strain doesn’t expect rates to rise again rapidly, they could move up or down, but slightly. He told Yahoo Finance, “The movement to higher interest rates certainly helps to reduce inflation, but again, it’s that structural element to it, that’s not just related to demand, is what’s making it a little bit more stubborn.”
Progressive dividend increases
Sun Life Financial ranks third after Manulife and Canada Life. It has collected $20.9 billion in annual premiums and increased its asset size to $173.2 billion. From an investment perspective, the insurance stock is a strong buy for its progressive dividend increases and potential supplementary dividends if financials allow, like in 2021.