Better Buy: Manulife Financial Stock or Sun Life Financial?

These two insurance stocks are strong choices, sure, but which is the better option all around for growth and dividends?

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 14, 2023 12:00 pm EDT

Insurance companies have long been considered strong long-term investments, offering stability and consistent returns. However, when it comes to choosing between two giants in the industry, Manulife Financial (TSX:MFC) and Sun Life Financial (TSX:SLF), investors face a challenging decision. In this article, we’ll delve into the financial health, recent performance, and future prospects of both companies to help you determine which might be the better long-term investment.

A red umbrella stands higher than a crowd of black umbrellas. — Source: Getty Images

Case for Manulife Financial Stock

Manulife has been making significant strides in the insurance industry. In the second quarter of the year, the company reported impressive results, with strong topline performance. The global insurance business, particularly new business, witnessed double-digit year-over-year growth. Manulife’s Asia business, in particular, showed remarkable growth, with a 26% increase in annual premium equivalent (APE) – a measure of the premiums written — sales and new business.

Global Wealth Asset Management (WAM) also contributed positively, generating net inflows of $2.2 billion and improving its core earnings before interest, taxes, depreciation, and amortization (EBITDA) margin by 2.2 percentage points quarter over quarter to 24.6%. Manulife’s capital position remains robust, showing strong financial stability.

Furthermore, Manulife is actively pursuing digital transformation, enhancing customer experience, and improving operational efficiency. Initiatives such as the partnership with Envestnet in Canada Retail and introduction of connected agent profiles in the Philippines demonstrate the company’s commitment to staying competitive in a digital world.

One key attraction for investors is Manulife’s generous dividend yield, currently standing at 5.72%. This offers income-seeking investors a compelling reason to consider Manulife stock as part of their long-term investment portfolio.

Case for Sun Life Financial Stock

Sun Life Financial also demonstrated resilience in a challenging economic environment. Kevin Strain, President and CEO of Sun Life, highlighted the company’s strong health and protection sales growth, reflecting the importance clients place on these services. Sun Life stock’s strategic acquisitions and partnerships, such as DentaQuest and the bancassurance partnership with Dah Sing Bank in Hong Kong, have been contributing positively to its growth.

Net income for Sun Life increased by $115 million from the previous year, driven by market-related impacts. The company’s focus on Asia is evident through its sales growth, particularly in Hong Kong, China, and India. New business contractual service management (CSM) also saw a substantial increase in Q2’23, driven by a favourable product mix and sales in the High-Net-Worth and Hong Kong markets.

Sun Life is actively pursuing digital leadership with the introduction of eSunPro, a digital health care service platform in Hong Kong, and the opening of the Sun Gateway prestige Client centre to enhance the client experience. These initiatives are geared toward making it easier for clients to access a range of services and products.

Sun Life stock offers a competitive dividend yield of 4.49%, making it an attractive choice for income-focused investors.

Which is best?

Choosing between Manulife stock and Sun Life stock for long-term investment depends on your investment goals and risk tolerance. Both companies have demonstrated strong financial performance and a commitment to digital transformation. Manulife stock stands out with a higher dividend yield, which can provide steady income to investors. On the other hand, Sun Life stock has shown impressive sales growth and a focus on health and protection services.

Investors looking for higher income may favour Manulife stock, while those seeking growth potential and diversification may find Sun Life more appealing. Ultimately, it’s crucial to conduct thorough research, consider your investment objectives, and consult with a financial advisor. Both Manulife stock and Sun Life stock are strong contenders in the insurance sector. This makes them worthy candidates for a long-term investment strategy.