Should You Buy Manulife Stock for its 5.7% Dividend Yield?

Manulife is a TSX dividend stock that offers shareholders a tasty yield of 5.7%. Is MFC stock a good buy right now?

| More on:
analyze data

Image source: Getty Images

There are several high-yield dividend stocks trading on the TSX. But just a handful of these companies are good long-term investments. You need to distinguish stocks that are positioned to deliver stable capital gains while maintaining their high dividend yield. So, it’s essential to identify companies that can generate cash flows across market cycles and grow earnings over time.

One such blue-chip TSX stock is Manulife (TSX:MFC), which currently pays shareholders an annual dividend of $1.46 per share, indicating a forward yield of 5.7%. In the last 10 years, Manulife stock has returned 120% to shareholders after adjusting for dividends, which is in line with the TSX index. But can it continue to deliver inflation-beating returns in the upcoming decade, too?

Is Manulife a good stock to buy?

Valued at a market cap of $46.5 billion, Manulife is among the largest companies on the TSX. It provides a wide range of financial services, including insurance, banking, annuity, wealth, and asset management.

Manulife emphasizes that it employs a bottom-up approach, which combines its strong asset management skills with an in-depth understanding of multiple asset classes. It is not limited to fixed-income investments but holds a diversified blend of assets.

Further, Manulife uses a disciplined approach and does not chase yield in the riskier end of the fixed-income or alternative asset markets, allowing the company to be armed with a high-quality investment portfolio.

Its invested assets totalled $403.4 billion at the end of the second quarter (Q2), which are diversified across geographies and sectors, lowering portfolio risk significantly.

Around 96% of its debt securities and private placement debt are investment grade, with 71% rated A or higher. Further, 25% of below-investment-grade holdings are Asian sovereign bonds where the assets are held to match against liabilities in countries Manulife operates.

With over 160 years of experience, Manulife is among the top 10 insurance companies globally, managing $1.3 trillion of funds as of June 2023.

In Q2 of 2023, Manulife increased APE (annual premium equivalent) sales by 12% year over year. Its new business value was up 10%, while global wealth and asset management net inflows totalled $2.2 billion.

What is the price target for Manulife stock?

Manulife ended Q2 with a LICAT (life insurance capital adequacy test) ratio of 136%. This ratio is used to assess the financial condition of insurers, and a ratio of over 100% is acceptable. Manulife claimed it has $21.2 billion in excess capital compared to the target ratio required by regulators.

Analysts tracking Manulife expect its adjusted earnings to expand from $3.1 per share in 2022 to $3.58 per share in 2024. So, the MFC stock is priced at 7.1 times forward earnings, which is quite cheap, given earnings are forecast to rise by 11.7% annually in the next five years.

Further, the financial heavyweight has increased dividends by 10% annually in the last decade, showcasing the resiliency of its cash flows.

Manulife is part of the recession-resistant insurance sector and is an ideal investment for those looking to shield themselves from volatility.

Analysts tracking MFC stock expect shares to surge by more than 15% in the next 12 months. After adjusting for dividends, total returns will be closer to 23%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Payday ringed on a calendar
Dividend Stocks

This 6.4% Dividend Stock Pays Cash Every Month!

First National Financial (TSX:FN) is a high-yield dividend stock that pays monthly.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Got $2,500? 2 Top Stocks That You Can Buy and Hold for a Lifetime

Through thick and thin, these are two TSX stocks you can count on over the long term.

Read more »

money cash dividends
Dividend Stocks

Got Yield? 2 Top Picks for Big Passive Income

Yield-hungry investors on the hunt for solid total returns over the next 10 years should consider Telus (TSX:T) and another…

Read more »

consider the options
Dividend Stocks

TFSA Income and Total Returns: Should BCE or Fortis Be a Top Pick?

BCE and Fortis have great track records of dividend growth.

Read more »

Community homes
Dividend Stocks

Where to Invest $8,000 for Your FHSA

For your FHSA, you can get reliable returns with GICs and potentially higher returns with riskier investments like dividend stocks.

Read more »

woman retiree on computer
Dividend Stocks

TFSA: How to Invest for $250 in Monthly Retirement

Canadians who are hungry for income in retirement should look to stocks like Chartwell Retirement Residences REIT (TSX:CSH.UN) in their…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: Is BCE Stock or Bank of Montreal a Better Buy?

BCE and BMO are off their 12-month highs. Is one stock now oversold?

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Want to Retire Rich? 3 Must-Have Stocks to Buy Now

Three dividend payers are must-have stocks right now if you want to retire rich or enjoy a comfortable life in…

Read more »