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%.