If you’ve been investing in Manulife Financial (TSX: MFC) and Sun Life Financial (TSX: SLF) over the past year, you’re likely feeling a bit dizzy. These companies have been climbing and falling as the markets react to interest rate increases, pauses, inflation, and deflation in the markets.
Yet while both of these companies are likely great long-term buys, which is the better buy on the TSX today?
Manulife stock
Market research suggests that Manulife stock looks undervalued right now, with a strong, bullish outlook in the near and far future. The company provides life insurance, annuities and investment management across the world. While most of its investments are in the United States and Canada, a large and growing segment is also in Asia.
The company continues to create stable earnings and cash flows by creating lower-risk profiles for its business. Meanwhile, the company continues to grow as management looks at high-potential businesses, such as in Asia, but also through behavioural insurance and investment management. These businesses should eventually contribute 75% of Manulife’s future investments while reducing its investment in long-term-care insurance and businesses with variable annuities.
Manulife stock has proven that the company can keep its expenses under control as well, achieving $1 billion in expense savings — well ahead of schedule during earnings. So, while rising interest rates are beneficial in the near term, long-term rates won’t return this stock back to where it was before the financial crisis. Instead, there is far more room to grow.
So, with a 5.57% dividend yield, trading at 3.37 times earnings, and shares up slightly by 8% in the last year, it’s a great time to consider Manulife stock.
Sun Life stock
So, what about Sun Life stock? This company looks like it’s near fair value at the moment, but does that mean investors should consider Manulife stock instead? The company is also in the life insurance and investment management sector. It, too, focuses on the U.S., Canada, and Asia, achieving stable earnings and cash flows. Yet there is a different strategy here.
Instead of getting out of long-term care and expanding in Asia, Sun Life stock has focused on investing in digital tools, deepening synergies between asset management and insurance, scaling benefits, and mergers and acquisition deals. Over the years, it’s reduced its risk profile substantially, with a solid mix of 40% wealth and asset management, 21% long-duration insurance, and 39% group and short-term insurance.
Sun Life stock continues to have a leading market position in Canada in terms of individual life and health insurance, as well as group and retirement benefits. However, returns from Asia have been lagging in a weaker market, which hopefully turn around in the near future.
While the value is there, trading at 10.93 times earnings and with a 4.55% dividend yield, growth doesn’t seem as large for Sun Life stock. With that in mind, investors may want to consider Manulife stock while it continues to trade in value territory. However, I wouldn’t ignore Sun Life stock altogether, as it continues to recover as well — hopefully, this time for good!
