Canadian insurance and asset management giant Sun Life Financial (TSX: SLF) stock has gained more than 9% in value so far in November 2023. The Canadian dividend aristocrat has just raised its quarterly dividend rate by 8.3% year over year this month, and investors remain bullish on its capacity to generate market-beating dividend-adjusted total returns – long term.
Investors in Sun Life Financial stock have been handsomely rewarded for holding the financial stock over the past several years. Sun Life stock generated north of 172% in total returns over the past decade, beating the S&P/TSX Composite Index’s 101%, by a wide margin. The value stock outperformed the broader Canadian stock market’s return in the five-year holding period too, and its year-to-date total return of 12.9% is nearly double the TSX’s potential dividend adjusted gain of 6.4% so far this year.
Although past performance doesn’t predict future returns, it’s only fair to label Sun Life stock as a proven historical outperformer. New investors could potentially beat the market again by holding Sun Life stock over the next decade. The cash-gushing dividend stock has the potential to richly reward its investors. Let’s see how.
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Sun Life Financial: A stable financial stock to buy and beat the TSX
Sun Life Financial’s life insurance, retirement, and asset management business does well in a stable, high interest rate environment. The profitable business sat on more than $1.3 trillion in assets under management by September 30, 2023. Although rising interest rates generally chew into valuations of financial assets (during their ascent), the financial industry’s portfolio discounts could be done now, and it’s time for Sun Life to reap the benefits of a stable, and yet elevated, interest rate regime in North America.
During the third quarter of 2023, Sun Life’s earnings reflected a 9% year-over-year increase in the business’s wealth and asset management segment’s profitability. The business segment earned higher investment income from volume growth, increases in yields, and higher management fees.
Most noteworthy, the insurer may invest each dollar received from client premiums at handsomely good interest rates going into 2024. Sun Life’s investment management arm contributed about 38% of adjusted earnings last year, and may contribute much more going forward. The portfolio earns better spreads as long as interest rates stabilize higher – and they may already have.
Legendary investor Warren Buffett loves the vast free funds insurance businesses receive from customers to manage. Sun Life is well positioned to keep servicing a mature and stable North American market’s insurance needs and earn better investment spreads and fees as interest rates stabilize while growing its Asian client portfolio on the side.
A cash-gushing Canadian dividend growth stock to hold
Management recently raised Sun Life Financial stock’s quarterly dividend by 8.3% year over year, and 3% sequentially to $0.78 per share for the fourth quarter – a strong sign that the company has confidence in its long-term financial and cash flow generation prospects.
The dividend is well covered, and comprised 47% of adjusted earnings during the most recent quarter.
Sun Life Financial has never skipped a dividend payment since initiating dividends in 2000. The financial stock has raised dividends for eight consecutive years now. The latest dividend rate yields 4.5% annually, and it is payable on December 29 to shareholders of record on November 29.
If you wish to receive your first dividend payout on Sun Life stock next month, you have to act now before month end.
