In this market, it’s hard to find many high-quality companies that are down big. Indeed, many of the top stocks I watch are near all-time highs, and for good reason. Investors are pricing companies such as Manulife Financial (TSX:MFC) reasonably, given their impressive long-term outlook. However, despite being down only 4% since its recent all-time high, this is a stock I think continues to remain a buy and hold play.
In this article, I’m going to dive into a few reasons why I think this is a stock worth buying at current levels and holding onto for the long term.
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A diversified business model
Most investors are aware that Manulife is a top insurance company. Offering a range of individual and group life insurance and wealth management products is its name of the game. As one of the three largest insurers in Canada, it’s a household name.
The thing is, Manulife has been increasingly growing its international wealth management business, which now contributes significantly to its top and bottom line. As demographics continue to become more favorable in markets like China, that should bode well for shareholders long term.
Decent valuation supported by strong valuation
Manulife’s valuation has certainly expanded of late as investors have piled into this insurance giant. Now trading at 15 times earnings, one could say the company is fairly valued compared to its peers. However, compared to most other companies with decent growth rates, MFC stock still looks cheap here.
That’s mostly due to the company’s strong financial performance in recent quarters. In the first quarter (Q1), Manulife brought in annualized premium equivalent growth of 21% to $1.9 billion, with its wealth management business generating inflows of $6.7 billion. Those are some impressive numbers to support the company’s 4.4% dividend yield.
Is this a stock worth buying?
I think Manulife is more than a value or dividend stock. It’s an insurance giant with strong growth tailwinds and a rock-solid balance sheet that really hits on all pillars of the investing equation for me.
Yes, Manulife has increased its dividend five times over the past five years, averaging annual growth of nearly 10% on this metric alone. But the company’s revenue and cash flows are growing even faster, meaning there’s outsized potential for future dividend growth as well, making this stock appealing to income investors as well as those focused on growth at a reasonable price.
At current levels, Manulife certainly is worth a look. And even though the stock is only down 4%, this looks like a dip worth buying, at least to me.
